GMAC calls for more shared equity innovation

Ramesh Sharma

January 21, 2006

Speaking at an All-Party Parliamentary Group forum on debt and personal finance Stephen Knight, executive chairman of GMAC-RFC, welcomed the government’s Homebuy initiative, acknowledging shared equity to be a potential solution to the growing affordability problem.

However, he expressed concerns about the rigid framework of the scheme and regulatory financial implications, calling for a generic statement rather than having to undertake substantial system development.

He said: “I understand the initiative will be able to help up to 40,000 people, which is a good but modest start. Potential first-time buyers (FTBs) need a scheme 10 times larger than this, which we think is possible. If the project could be freed up from the current rules as to who qualifies, and what terms lenders can offer, we could make shared equity a market-transforming product.

“We have pressed the Financial Services Authority (FSA) to allow borrowers of a shared equity product to receive a generic statement at point-of-sale that demonstrates the equity they would be giving up in a range of growth scenarios.”

Other speakers highlighted the need for increases in long-term housing supply as an aid to affordability problems. Bob Pannell, head of research and information at the Council of Mortgage Lenders (CML), said: “ A lack of long-term housing supply is primarily responsible for affordability problems.”

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