Help to Buy scheme success will be down to detail, says CML
Following today's Budget announcement of a "Help to Buy" package incorporating a new government guarantee scheme designed to support the widening of availability of low deposit mortgages, the Council of Mortgage Lenders confirms that it will work constructively with Government to help deliver a workable scheme, but emphasises that the detail of its operation will be crucial to its success.
Clearly, to be successful the voluntary scheme will need to be robust, not overly complex, result in the delivery of products that are attractive to borrowers, and be commercially viable for lenders. To achieve this, the scheme will need to ensure that all lenders will be able to gain capital relief in recognition of the risk mitigation offered by the Government guarantee.
Without capital relief, and depending on the size of the fee, the cost of the commercial fee that lenders will have to pay to gain the benefit of the scheme could make the scheme uneconomical.
Because it will take some months to design and put the scheme in place, the benefits will not be immediate. However, a successful scheme could ultimately enable lenders to offer more low-deposit loans than they would otherwise be able to do without incurring concerns from funding markets, prudential regulators, or their own internal risk committees.
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In the meantime, the CML urges the government and the building industry to continue to support NewBuy, as well as the increased focus on the reinvigorated equity loan scheme that replaces FirstBuy.
The CML has commissioned consumer research to explore current attitudes to low-deposit mortgages, and mortgage market issues more generally. The findings will be available in the next few weeks and will be used to calibrate the likely consumer appetite for the proposals.
Commenting on the Chancellor's Budget speech, CML director general Paul Smee says: "The announcement of Help to Buy which will help mitigate the risk of those lending low deposit mortgages shows a positive re-focus on promoting home ownership. The benefits will not be immediate, and we need to look at the detail of implementation, but this could have a significant impact in the medium term."
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