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Offering mortgage guarantee to all could cause same problems as Help to Buy – Star Letter 12/03/2021

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  • 12/03/2021
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Offering mortgage guarantee to all could cause same problems as Help to Buy – Star Letter 12/03/2021
Each week Mortgage Solutions and its sister title Specialist Lending Solutions pick the top comment from our readers.

 

The first comment came from Tim Hague, who replied to the article: Sunak expects first-time buyers to be main users of mortgage guarantee scheme 

He said: “It will be critical to ensure scheme rules reflect the chancellor’s aims.  

By opening the scheme to everyone without fixing the housing supply shortage, the likely increase in house prices caused in the same way as the Help to Buy scheme, combined with affordability rules, has the potential to make owning a home even more challenging for first-time buyers. 

Hague added: “It will, of course, be fantastic news for next time buyers and a welcome stimulus for property sales more generally. 

 

Buyers are most accurate representation of prices 

The second article to receive a comment was: AVMs provide more accurate valuations than surveyors – JLM 

HEJ said: “Valuations are supposed to illustrate market value. They are there chiefly to protect the lender if a property is repossessed. 

“As property values increase, and repayment mortgages predominate, then the risk of a valuation being inflated matters less and less as time passes.  

Similarly, most buyers pay a decent deposit – certainly more over the past 12 months as 95 per cent loan to value (LTV) and 90 per cent LTV lending has dropped away – and very small number of properties end up being repossessed. So the value is, to a great extent, irrelevant from a lending risk perspective 99 per cent of the time. 

HEJ added: “Therefore, valuations are rather unimportant, except that lenders set great store in them. If market value is demonstrated by a buyer willing to pay a certain amount, and the risk to the lender being almost nil if this is slightly too high or too low.  

“If we look at RICS figures on house prices, versus what has actually happened over the last few years, the surveying industry is too beset by negativity and paranoia regarding professional indemnity claims to be an impartial arbitrator of what represents true value. The market, by which I mean the buyer, is generally more reliable. 

 

Furlough approach has to be holistic 

On the article: ‘Lenders have not got to grips with how the pandemic impacted borrowers’ – HuntPaul Barrett said: “Lenders can’t be blamed at all. 

They have to make holistic decisions, one of the major ones being whether an applicant has a confirmed job and relevant wage. 

Barrett continued: “If furloughed, no applicant can confirm this. Furlough has to end for a lender to know whether an applicant still has a job and income. 

Lenders are only being responsible when not advancing loans to furloughed workers. Of course, all this is extremely frustrating for all concerned but certainly, lenders are as much a victim of furlough as those furloughed. 

He added: “Until furlough ends nobody will know what the true status of any applicant is. It is all very annoying, but we are where we are. 

 

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