The government’s Mortgage Guarantee Scheme is not being used by many lenders, to the surprise of Nick Morrey, product technical manager at John Charcol.
Chancellor Rishi Sunak confirmed the launch of a Mortgage Guarantee Scheme in the Budget, to help those with lower deposits onto the housing ladder.
Morrey said: “Lenders will not divulge exactly why they have said ‘no thank you’ to the scheme, but ultimately it means they have far more control over the whole transaction with regards to pricing and criteria.”
He also pointed to lenders not having to set up robust systems to track and monitor any and all mortgages sold that are part of a scheme financially linked to a third-party.
He added: “So all the fuss regarding the launch seems to be for very little. But that is only one side of what the government scheme has achieved.”
Morrey explained that the introduction of the scheme has at least forced lenders to think about a return to 95% loan-to-value (LTV) lending.
He said: “The question many of us asked ourselves is if all these lenders came back to 95% lending in April self-backing without the need for the government scheme, why did they not do it earlier?
“How come they were suddenly all able to do it at once? Well, the answer is strength in numbers.”
Morrey believes that if one lender had broken ranks months ago they could well have been the only lender to do so, and would have been flooded with applications and subsequently forced to pull back out.
He added: “The government effectively forced their hands, and for that I suspect thousands of first-time buyers, not looking to buy new-build properties, will be very grateful.”