Lenders will be able to pick up the slack when the Help to Buy Mortgage Guarantee scheme expires at the end of the year, director of Legal & General Mortgage Club Jeremy Duncombe has predicted.
Lenders will be able to pick up the slack when the Help to Buy Mortgage Guarantee scheme expires at the end of the year, director of Legal & General Mortgage Club Jeremy Duncombe has predicted.
Duncombe said lenders are no longer relying on the government scheme even though it was valuable at its introduction in October 2013 when banks needed encouragement to lend at 95% loan-to-value.
He said: “Lenders will pick up the slack when the scheme expires and I don’t see the cost of 95% LTV deals going up.
“The scheme isn’t that beneficial anymore because lenders can self-insure – from a cost point of view the mortgage guarantee under Help to Buy is no cheaper than doing it themselves.”
Duncombe was less confident the market would support the withdrawal of the Help to Buy equity loan scheme, which is set to run until 2021.
He added: “The equity loan scheme is going to be harder to replace but its extension should give builders confidence. That needs planning nearer the time.
“However how affordability is assessed needs to be looked at. Even if someone has been renting for five years at £1,000 a month they might not be able to get a mortgage at £700 because of stringent affordability requirements.
“If lenders could be more flexible with affordability that could offset the need for the equity loan scheme though currently they have to work within regulatory rules.”
