Not quite perhaps, but the news that the state is in discussions with lenders and mortgage trade bodies to explore how mortgage indemnity guarantees (MIGs) can be used to improve access to high LTV mortgages is further evidence of a concerted effort by the Treasury to free the blockages that currently plague the lending landscape.
I interpret this potential measure as a complementary arrangement to the Funding for Lending Scheme (FLS) – as opposed to an admission that it is not working – and, credit where it’s due, it’s good to see acknowledgement in the corridors of power of the issues facing first-time buyers.
We have seen mortgage indemnity guarantees used in the mortgage market in the past to varying degrees of success and there is certainly no harm in seeing whether they represent an effective solution this time round.
It will be interesting to note what effect incoming Bank of England governor Mark Carney will have on proceedings given the prevalence of MIGs in his native Canada. There, mortgage insurance is mandatory on mortgages above 80% LTV and is marketed as supporting first-time buyers as well as protecting lenders.
Another benefit of the new MIG measures being discussed is that they would be available on older properties. Many government schemes in the past, including the current incarnation NewBuy, have been launched in association with builders and property developers and assume that all first-time buyers want to own new-build properties when this is certainly not always the case.
Simply put, the more assistance first-time buyers are given and the more freedom they have to buy where they want rather than being shoehorned into programs characterised by limited usefulness, the more likely we are to witness a pick-up in the number of new borrowers.
But it is not just down to the government to crack the code however, lenders must also ask themselves if they are doing all they can to help borrowers buy their first homes.
The current situation where the average age of first-time buyers is creeping later into the thirties and deposit sizes are hindering otherwise appropriate applicants needs to be addressed.
Bob Hunt is chief executive at Paradigm Mortgage Services
