But looking at the chancellor’s announcement of a ‘new’ government guarantee to support greater numbers of 95 per cent loan to value (LTV) mortgages, then this might be one ‘struggle’ that has concluded in such a fashion.
Looking at the anatomy of this decision, it’s been clear for some time that the government has wanted lenders to do more in the high LTV space.
Lest we forget, in November last year, not only were there next to no 95 per cent options, but there were very few 90 per cent deals either. Only during the tail-end of the year did lenders start to move back into this space.
There have not been greater product options because, quite frankly, lenders have not wanted to move up the risk curve to deliver them.
But government has wanted them to be active here, and the most powerful lenders have clearly gone back to the administration and said: ‘We’ll do it, but we need a guarantee from you.”
So they got what they wanted and so have the government.
Now, this probably shouldn’t detract from the fact that lenders have hardly busted a gut to move into this space, probably because they’ve been pretty happy with the level of business they’ve taken recently, the margins they’re able to secure, and the lower-risk borrowers they’ve been able to lend to.
Higher LTV products have been within their grasp if they’d had any appetite. They could have used private mortgage insurance – an option for lenders for the past 25 years.
Let’s face it, it is likely to be cheaper than the government guarantee, be more flexible and will allow them to tailor their high LTV proposition far more effectively. Plus it will be available after the latest intervention.
These were all criticisms of the Help to Buy guarantee scheme from a few years ago and given this scheme is likely to be a carbon-copy of that they will be valid criticisms again.
However, the bigger lenders have clearly held out for a government guarantee perhaps because they feel it has more weight, and no doubt with one eye on the positive PR spin they can put on their involvement now.
Let’s be honest here, the market desperately needs far more 95 per cent LTV product supply and the lenders who have already announced their involvement will no doubt secure business.
But I hope we see the same lender response to the 95 per cent Help to Buy scheme, other lenders working outside the initiative moving back into the 95 per cent LTV space, often using private mortgage insurance to do this.
That could be the true positive of the government guarantee – that it gives other lenders confidence to make their return and that it ultimately delivers a far more competitive product choice for borrowers who have not had any over the last 12 months.
If that is the scenario, then I think we can all claim victory.