The new that the government is to bring forward the second part of its Help to Buy Scheme from next year to next week, has raised a number of issues for mortgage insurance provider Genworth.
Angel Mas, president, Mortgage Insurance Europe at Genworth, said: “It is very surprising that the scheme is being launched without clarity on key points such as the fee and the way in which capital relief will work.
“Clear, predictable, up-front capital relief for lenders when they use the scheme is vital, otherwise lenders will have little incentive to participate. And this capital relief must be available to the private mortgage insurance market to create healthy competition with the Government scheme.
“To protect the taxpayer from a house price bubble, it will also be essential for there to be adequate and ‘commercial’ pricing of the guarantee to protect the taxpayer from risk, for there to be vigilant monitoring of the scheme to ensure lending remains prudent, and for there to be an ‘exit strategy’ for when the scheme comes to an end.
“Capital relief is not clear, the pricing is not clear and it is still unclear how lending will be monitored to avoid an erosion of underwriting standards, as happened in the last crisis with this kind of lending. UKAR has a role servicing the scheme and it will be critical to ensure that servicing standards are high and the loans are carefully monitored.
“We have also seen nothing in the announcement to indicate how the Government will extricate themselves now they are committing the taxpayer to take on high loan-to-value mortgage debt. Clarity on this point is urgently required. There is a clear role for the private mortgage insurance industry to work with the Government on this but this needs to be considered now not in three years time.”
