Published: 8 October 2013 | Author: Bernard Clarke
Today, we welcome publication by the government of its detailed package of information about the Help to Buy mortgage guarantee scheme.
A number of lenders have already announced they will be offering mortgages under the scheme. That makes it more likely that there will be an increase in the availability of higher loan-to-value mortgages, as the guarantee scheme should enable lenders to have greater confidence in making loans to creditworthy borrowers with smaller deposits.
Borrowers who have not yet managed to save a large deposit but are able to afford 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.
But, as we point out in our main article today, an increase in the supply of new housing will be a crucial factor as the mortgage market continues to unfreeze, assisted by Help to Buy and the Funding for Lending scheme. People need to have homes to buy, as well as the finance to buy them.
Borrowers must also expect that their ability to afford mortgage payments will be assessed as rigorously as an application for any other mortgage. From the borrower’s perspective, there is no practical difference between a mortgage that is supported by a Help to Buy guarantee and one that is not.
The key benefit of the scheme is in providing additional security to lenders, so making it more likely that they will be willing to advance loans to creditworthy borrowers with modest deposits. But lenders will use their own commercial judgement to decide whether to participate in the scheme or not. Some may take the view that they already offer some mortgages with lower deposits and may not wish to increase their lending at this level.
We also welcome the role of the Bank of England’s Financial Policy Committee in overseeing the scheme, as well as its more general oversight of housing market conditions. Independent checks and balances to ensure that the policy intervention does not have unintended consequences are sensible and proportionate.