On the eve of the Conservative party conference in Manchester Prime Minister David Cameron revealed fresh details on the Help to Buy mortgage guarantee scheme, bringing the launch forward from January.
He announced that Halifax, alongside RBS and NatWest, had signed up to the scheme. We’ve always been supportive of Help to Buy, and are working through the finer details of our product proposition. We’ll be ready to announce shortly.
What is abundantly clear is that intermediaries remain a very important part of the overall mortgage distribution strategy for Lloyds Banking Group and our Help to Buy proposition will be available both to intermediaries and through our direct channels too.
Every initiative such as this will have its supporters but also its critics – and this scheme is no exception. The Help to Buy mortgage guarantee scheme is designed to address the issue of accessibility by helping buyers and homemovers who have a small deposit, or little equity, allowing them to buy a home with a deposit of just 5%.
The government will guarantee the next 15% of the loan for a fee, reducing the banks’ potential risk so they can offer mortgages to higher-risk customers who are currently locked out of the market or unable to move up the ladder. This scheme is not about offering cheaper mortgages to borrowers.
Neither is it the case that we’ll go around giving mortgages to people who can’t afford them, as all applications will still be subject to our normal robust affordability and income assessments. The scheme is simply designed to support those customers who can afford a mortgage but who lack the size of deposit needed under current rules.
Critics do argue that as we’re seeing both rising house prices and, according to the latest Bank of England data, mortgage approvals at their highest level in more than five years, is this the right time for the guarantee scheme to be launched or should it be scrapped altogether?
We should remember that although we are seeing a national increase in house prices, this is not consistent across the country. It’s quite easy to base views on what’s happening in London, but there are many regions where house prices are flat or barely moving. Secondly, yes, market activity has improved, but, it is still low by historical standards with home sales remaining way below their peak levels.
The Help to Buy mortgage guarantee scheme will address the issue of accessibility and build on the success of the Help to Buy equity loan scheme and NewBuy in the new build sector. The mortgage guarantee scheme will expand much needed support to a wider cross-section of those in the market and will, I believe, consolidate the current recovery and broaden its base.
Mike Jones is director of Intermediaries at Lloyds Banking Group
