Lenders, including Halifax and RBS/NatWest have already announced product details with the mortgages out this week. HSBC, Virgin Money and Aldermore have also announced plans to offer mortgages under the scheme in due course.
The CML said this means that there is likely to be an increase in the availability of high loan-to-value mortgages as the guarantee scheme should stir up greater confidence to offer creditworthy borrowers with low deposits a mortgage.
It said borrowers must expect their ability to afford repayments on the mortgage to be assessed as rigorously as an application for any other mortgage.
Some lenders may take the view that they already offer some mortgages at high LTVs without a guarantee, and may not wish to increase lending at this level, it said.
The CML also welcomed the oversight function of the Bank of England Financial Policy Committee over the scheme and housing conditions.
CML director general Paul Smee said: “The key benefit of the scheme is in providing additional security to lenders, and so making it more likely that they will be willing to make loans to creditworthy borrowers with modest deposits.”
Stephen Smith, director, housing & external affairs, Legal & General Network said this will further boost confidence in the market, but added: “There are still many important questions to be answered around pricing. The likelihood is that mortgage rates will not start at the cheapest end of the spectrum and so those borrowers seeking to take advantage of the scheme should carefully plan to ensure they can afford it.
While schemes like Help to Buy are a help to many borrowers, the other side of the equation is that we simply don’t have enough houses to meet demand. This lack of homes is causing house prices to rise which will be detrimental to affordability over the long-term. Housing supply now needs to be top of the political agenda if we are to get the market back to a more stable and sustainable norm.”
