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Lenders welcome mortgage indemnity scheme

Thursday, 1 December 2011 12:10 PM

Mortgage lenders have welcomed government support for a mortgage indemnity scheme as "a step in the right direction" that can contribute to finding a solution to the property shortage.

The scheme for new-build homes was revealed in last week's housing strategy and confirmed by chancellor George Osborne in his autumn statement on Tuesday.

Several lenders and 30 builders representing 60 per cent of the market have said they will take part. The scheme will cover England only but the Council of Mortgage Lenders (CML) said it hoped the devolved administrations in Wales, Scotland and Northern Ireland would see the benefits too.

The CML say the scheme has the potential to boost the economy by enabling more homes to be sold, make mortgages more available to buyers with low deposits, give developers access to more customers and mitigate risks for lenders.

However they also believe there are limits to the market problems that the scheme is capable of addressing.

They said: "It will not, for example, increase the flow of funds available to lenders.

"Conditions in funding markets are likely to remain challenging."

However, the CML added that it may make higher loan to value mortgages more readily available. The funding shortage had led to a strong preference for risk-averse lending.

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