The meeting was, in my view at least, a fairly productive discussion with the Chancellor clearly in listening mode. The meeting was a continuation of the collaborative approach that HM Treasury has taken in engaging with industry on the detail of the scheme. The meeting which took place overlooking the Downing Street garden made me consider whether this scheme would make everything in the housing garden rosy?
Well, the scheme isn’t finalised but it isn’t likely to be perfect, nor will it be a panacea for all of the challenges facing mortgage borrowers today. I would question whether it should even be needed at all.
The fact is that building societies and other mutuals have been lending to first time buyers and those with low levels of deposit for some time. Around a third of the sector’s lending in the first five months of 2013 has been to first time buyers, with almost 30% of this finding its way to borrowers with a deposit of 10% or less.
Have all lenders been doing the same thing? Well clearly not, as if they had then Mr Osborne would not have needed to intervene. Given there is a need to encourage more lenders into this space then it is important that the scheme is available to all lenders that wish to sign up. To my mind there are three key areas that lenders need sight of before making a decision as to whether the scheme is right for them: The size of the commercial fee; detail of whether the scheme will attract capital relief; and the administrative burden involved in joining the scheme.
I made these points clearly to the Chancellor this morning and while we now have a little bit more detail on eligibility and administration, further information is still needed on the fee and capital treatment. It is vital also that there is a clearly articulated exit strategy to avoid unhelpful distortions in the market.
For today’s coverage of the Help to Buy announcements, click HERE