CML welcomes Help to Buy scheme
CML director general Paul Smee said: “Borrowers who simply haven’t yet managed to save a large deposit but are able to manage the repayments on a loan are already seeing an improvement in the mortgage choices available to them, and this will increase with the advent of the Help to Buy mortgage guarantee scheme.
“As the mortgage market continues to unfreeze, assisted by Help to Buy and Funding for Lending, an increase in the supply of new housing will be a crucial factor in success. The homes need to be there for people to buy, as well as the finance to buy them.
“The key benefit of the scheme is in providing additional security to lenders, and so making it more likely that they will be willing to make loans to creditworthy borrowers with modest deposits.”
Several lenders have already announced that they will be offering mortgages under the scheme.
This means that there is likely to be an increase in the availability of high loan-to-value mortgages as the guarantee scheme should enable the lending industry to have greater confidence in making mortgages available to creditworthy borrowers with low deposits.
The CML stressed that borrowers must expect their ability to afford repayments on the mortgage to be assessed as rigorously as an application for any other mortgage. It also added that from the perspective of the borrower, there is no practical difference between a mortgage that is supported by a Help to Buy guarantee and one that is not.
As for lenders, the CML said it would be left to their commercial judgment as to whether to participate in the scheme or not. Some may take the view that they already offer some mortgages at high LTVs with out a guarantee, and may not wish to increase lending at this level, it added.
The CML also said it welcomes the oversight function of the Bank of England Financial Policy Committee over the scheme, as well as its more general oversight of conditions in the housing market. Independent checks and balances to ensure that unintended consequences do not arise from the policy intervention are sensible and proportionate, it went on to say.
Stephen Smith, director, housing and external affairs, Legal & General Network, added: “Our Mortgage Mood data shows that one in six people plan to buy a house in the next six months so today’s extension of Help to Buy will be a welcome boost for many prospective homeowners.”
But he added: “However, there are still many important questions to be answered around pricing. The likelihood is that mortgage rates will not start at the cheapest end of the spectrum and so those borrowers seeking to take advantage of the scheme should carefully plan to ensure they can afford it.
“While schemes like Help to Buy are a help to many borrowers, the other side of the equation is that we simply don’t have enough houses to meet demand.
“This lack of homes is causing house prices to rise which will be detrimental to affordability over the long-term. Housing supply now needs to be top of the political agenda if we are to get the market back to a more stable and sustainable norm.”