End of Help to Buy 2 a concern for high LTV

Ryan Bembridge

September 30, 2016

The right commitments and support structures need to be in place now that the Help to Buy mortgage guarantee scheme is coming to an end, AmTrust International has warned. 

Yesterday Chancellor Philip Hammond wrote to the Bank of England saying the Government would no longer act as ultimate guarantor on 95% LTV deals. He said the scheme had achieved its aim, having helped over 86,000 households and stimulated high LTV lending since its launch in 2013.

But Patrick Bamford, business development director for AmTrust International, mortgage and special risks, said it was vital that the option to get capital relief via private mortgage insurance remains open to lenders to keep the high LTV market going.

Bamford said: “It was neither desirable nor sustainable for high loan-to-value lending to be carried permanently on government shoulders, but attention must now focus on ensuring the right commitments and support structures are in place, so that help for aspiring homebuyers with modest deposits remains on the table without building up extra risk in the financial system.

“While the Chancellor suggests the scheme’s purpose has now been ‘successfully achieved’, there are concerns that the lengthening shadow of higher capital requirements for lenders will undo that good work and put new barriers in place.

“The Help to Buy experiment proves that activity can be stimulated while effectively managing risk, and it is vital that the option to get capital relief via private mortgage insurance remains open to lenders in the interests of maintaining and improving competition.

“Help to Buy has established a culture of high LTV protection in the UK mortgage market by insuring lenders against economic risk, and it would seem imprudent to abandon this principle at precisely the time when uncertainty has returned following the Brexit vote.

“Now is not the time to take our foot off the pedal: for 21 years from 1982 to 2002, the typical first-time buyer deposit was 10% or less, but even with Help to Buy in place, this has remained at 17% or higher from 2013 to 2015.

“The country continues to face a crisis of access to homeownership and there will be a clear expectation on government and lenders to maintain their support for first-time buyers.”

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