Simplify low-cost home-ownership and improve the safety net: CML response to the housing green paper

The Council of Mortgage Lenders has today responded to the government's consultation paper Homes for the future: more affordable, more sustainable. The CML urges the government to simplify the current confusing range of low-cost home-ownership schemes, which are becoming ever more difficult for lenders to engage with, given the relatively small number of people that they assist.

Jackie Bennett, CML head of policy, comments:

"The pilot open market homebuy scheme launched around a year ago, which the CML saw as worth testing in the market, has in practice proved over-complicated and overall take-up has been poor. Those lenders involved with the scheme devoted considerable resources to it, only to find that the government changed the parameters before allowing the pilot to run its course. We would now prefer to see the government's efforts being put into publicly funded shared equity schemes linked to new housing supply, which is crucial."

The CML also urges the government to reform the way in which it provides state support to home-owners who find themselves in difficulty.

While lenders have a duty to lend responsibly, and borrowers have a responsibility to manage their financial affairs to the best of their ability, problems will still occur.  And home-owners receive much less support than tenants with their housing costs if they fall into difficulties. The CML believes that the government should review the support it provides to home-owners. There are tight rules on eligibility for assistance, and even where it applies it is subject to a £100,000 ceiling on the level of mortgage that will be supported. This figure has applied since 1995 (and was cut from more generous previous limits) but it would now be around £142,000 if it had risen in line with RPI or around £300,000 if it had been linked to house price inflation.

Jackie Bennett commented:

"The safety net for home-owners is still too patchy and piecemeal to be effective. While the idea of a compulsory insurance scheme might seem superficially attractive, it would not deal with the range of uninsurable risks that people face. There are potentially more creative ways to address the problem, such as providing state assistance under a registered charge against the property that might allow part or all of the benefit received to be repaid if and when the property is later sold. In any case, the current level of state support is woefully inadequate."