The Chancellor is yet to unveil the key cost and capital detail to mortgage lenders about the indemnity plan. Under the scheme, the government will take on the risk of mortgage borrowers with higher loan-to-value mortgages defaulting, by guaranteeing a portion of their loan.
The aim is to encourage more lenders to offer more competitive rates at higher loan to value, by reducing their risk.
The breakfast meeting held at Number 11 Downing Street reportedly involved Lloyds, Nationwide, RBS and Barclays, and builders such as Persimmon and Taylor Wimpey.
Osborne said: “I’m determined to back people who want to do their best for their families. Help to Buy is about getting behind those who aspire to own a home.
“The mortgage guarantee will support an increase in high loan-to-value mortgages for people who can’t afford large deposits, and it will also boost housebuilding. As of today lenders have the detail they need to go away and get ready for next January’s launch.”
Paul Broadhead, head of policy at the Building Societies Association, who also attended this morning said the meeting was open and productive.
However, no details have been confirmed on key questions including capital relief for lenders, the commercial fees involved or reporting requirements as yet, he said.
“What we got today was a sharing of information and what will follow now is a hammering out of what will be the rules of the game,” said Broadhead.
“This was a conversation, not a robust one and a thanks for all your positivity from the Chancellor,” he added.
Many building societies are already using indemnity guarantees to lend at high LTVs and the cost of both schemes could be too much for some, said Broadhead. The lack of an exit strategy for the three-year scheme also remains a concern, he added.
Critics of the scheme fear that it will fuel a rise in house prices at a time when average values are already increasing faster than the rate of inflation.
Treasury minister Sajid Javid told the Today programme the fee had priced commercially but also needed to encourage lenders to participate: “Most financiers will tell you though our economy is recovering what we are finding is financial markets are not returning to a state of liquidity as before.
“There is a need for some sort of government intervention.”
Ben Thompson, managing director of Legal & General Mortgage Club, said freeing up the ability for many more new homes to be built in the right areas in the UK is key to match pent up and future rising demand.
“This is important for many social and economic reasons, and in conjunction with a rising market would help to control house price growth. Yes we need a healthy market, but a healthy housing market has to be one that allows first-time buyers to be able to afford to buy at a sensible age,” he said.
