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It may be time to resurrect the mortgage guarantee scheme – Star Letter 26/06/2020

  • 26/06/2020
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It may be time to resurrect the mortgage guarantee scheme – Star Letter 26/06/2020
Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the top comments from our readers in our Star Letter section.


The first comment this week was in response to the article: Welsh govt’s piecemeal plans to open housing market will damage economy, warns CA 

Kevin Roberts said: “Whilst I agree with Lloyd’s comments, of greater concern to the broker community in Wales and the UK and probably doing more damage than anything at present, is lenders restricting borrowing to 85 per cent loan to value (LTV) 

As a firm we have dozens of first-time buyers with a 10 per cent deposit desperately willing to purchase.  

He added: “They are the foundation of the housing market generating work and wealth for the wider economy thus helping to sustain house price values. Most of us remember the government resurrecting 95 per cent mortgages through their Help to Buy mortgage guarantee. 

Now may be the time for government and lenders to come together again to work a solution that gets the lower rungs of the ladder moving.


Affordability inconsistencies 

The second article to get a comment was: ‘It’s sad to decline business I would have completed months ago’ – Marketwatch 

LankyDes said: “First, let me say that I have a great sympathy for young people nowadays. I’m very glad that I am 62 rather than 22. Anyone who knows me, knows I am far from being an apologist for lenders. However, I do think that they have a right to make a reasonable margin on higher LTV lending. 

Remember, not only are rates historically low but higher lending charges are also virtually a thing of the past which helps the higher LTV buyer. Although, of course it could be argued that if there were higher lending charges, there would be more higher loan to value lending. 

I think a small [house] price fall would be good for firsttime buyers. The economy has been to skewed to rising house prices for many years with people using their house as a cash dispenser. That has been used to compensate for a downward squeeze on incomes.

LankyDes continued: “I do however have sympathy for the view that people who have proven affordability should be given more leeway. The Financial Conduct Authority has a lot to answer for here, turning affordability calculators into God.  

I had my affordability calculator 16 years ago, long before most lenders. They are very useful, but they are not infallible. If they were, how could one lender give £60,000 and another £20,000 for the exact same data?  

I have a case where a small mutual has declined a 95 per cent shared ownership because it misses affordability by £15 per month, stress tested at 7.89 per cent. That is an utter nonsense when the client has paid £100 more rent for the last four years than she will be paying on a five-year fixed mortgage and rent.  

He added: “It makes a complete nonsense of that mutual’s claim to make human decisions. There are numerous other factors on this case which would give further comfort to a sensible underwriter who was taking an overview of risk, rather than a tick box mentality. 

That is a very rare case where I have overridden my own affordability calculator. I wouldn’t do it for a person who hadn’t proved their ability to run a household but for a mature lady who has brought up a family single-handedly, it would be silly not to do so. 


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