Positive reaction to Government’s housing strategy

The mortgage industry has generally welcomed the Government’s housing strategy, particularly the New Build Indemnity Scheme, which should mean that mortgages of up to 95% LTV will be more widely available on new build homes.

CML director general Paul Smee commented: "This scheme is good news for home-buyers, developers and indeed the UK economy. Lenders will be able to reduce the level of deposit needed by home-buyers in the new build sector, enabling more buyers to buy and so supporting the flow of new housing development, with all its positive consequences for jobs and the economy as a whole."

“UK lenders will not be compromising the quality of their lending or increasing their risk of loss through this scheme. It will, however, allow credit-worthy borrowers to obtain higher loan-to-value mortgages on new build properties, without requiring the level of deposit which has become usual in recent years.

“It is also anticipated that lending within the scheme will attract relief on the regulatory capital that would otherwise be required on high loan-to-value lending, because of the significant mitigation of the lending risk.”

A number of lenders have confirmed they will participate in the New Build Indemnity Scheme including Nationwide which also said it would like to see the current annual cash ISA limit of £5,340 increased to the maximum £10,680 in order to encourage those customers who are saving for a deposit.

In addition, the society would like to see greater flexibility and fluidity in the ISA market, with savers able to move their funds between cash and equity products without restriction.

Graham Beale, chief executive of Nationwide said: “This scheme seeks to boost the supply of properties available with modest deposits and, as such, we are pleased to be part of it, helping to shape its design and development.

“We would really like to see people who are saving for a deposit given more help through higher ISA limits and the flexibility to move their funds between cash and equity ISA products, without the restrictions that are in place now.”

However, restricting the scheme to new builds has its limits. Helen Adams from first-time buyer advice-site FirstRungNow.com, commented: “Funding which only supports new build is good for the house-builders who are being subsidised but does little to move the whole market as there is no onward chain when a new home is purchased.”

Grenville Turner, chief executive of property services group Countrywide, agreed: “Whilst the proposed new build indemnity scheme is a welcomed boost to homebuilders and prospective buyers, at a time where deposit affordability has remained a significant barrier to not only first time buyers, it is disappointing to see a lack of measures to assist the vast majority of  home movers.

“A stamp duty holiday for all homebuyers  up to £250,000 by would have been a welcomed boost to the resale market and should still be considered.

He added: "The government needs to ensure that their promise of increasing house building is followed through and not restricted by planning red tape.

Charles Haresnape, managing director of Aldermore Residential Mortgages, said it will be interesting to see how the proposed £400 million house building fund translates into new homes.

He commented: “At the moment there are approximately 100,000 new homes being built every year, but that figure needs to increase to 240,000 if demand for new housing is to be satisfied.

“It is suggested that the Government proposed new initiative will result in just 16,000 new properties which still leaves the Government woefully short of its target."

Paragon Group chief executive Nigel Terrington said: “Current housing completions simply aren't sufficient to meet forecast household formations, so a commitment to build thousands of new homes is a positive start, whilst plans to support homebuyers through the mortgage indemnity scheme will stimulate the first-time buyer market.

“It is crucial to the success of the mortgage market and the economy that we have a housing market in balance and with growth options across both the rental and owner-occupied sectors.”