In a survey commissioned by Genworth, the mortgage insurance provider, and conducted by YouGov, MPs were asked their views on the Government’s Help to Buy mortgage guarantee scheme and its potential impact.
Over half of MPs (51%, rising to two-thirds of all Conservative MPs) support the involvement of private sector insurance to facilitate an orderly exit as an alternative to the Government and taxpayer continuing to take on the risk. 52% thought there was a risk that the scheme would become permanent.
There was optimism amongst Conservative MPs that the scheme would result in an increase in the number of houses being built. Eight out of 10 Conservative MPs felt the scheme would help increase house building, while only one out of four Labour MPs felt the same way. 54% of MPs in total thought the scheme would result in more houses being built.
Seven out of 10 MPs believe Help to Buy will increase house prices. Splitting the results by major party, eight out of 10 Labour MPs think house prices are likely to increase as a result of Help to Buy while only just over half of Conservative MPs feel the same.
72% of MPs were concerned about the impact on the taxpayer if the Government guarantee was significantly called upon and 66% were concerned about the £12 billion contingent liability from the scheme.
Angel Mas, President, Mortgage Insurance Europe at Genworth, commented:
“The beginning of this year marked the official start of the second part of the Help to Buy scheme – the mortgage guarantee element – and it’s clear that it has boosted competition in the mortgage market for those with low deposits who are seeking finance. It is our view that the number of products is improving and average rates at higher LTV levels are dropping - not just because of those lenders participating in this Government scheme but also due to lenders who are utilising private insurance to compete in the space. This is positive news for the marketplace.
With an eye to the near future, it’s clear that the Government should start thinking about the exit strategy for the scheme now. Just turning off the high loan to value mortgage finance tap at the end of 2016 will risk a cliff since the issues that led to the introduction of Help to Buy 1 and 2 have not gone away. Access for first-time buyers to prudent high loan to value mortgage finance will remain the lifeblood of a healthy mortgage market.
"There is optimism that the scheme will facilitate house building, but as Morgan Stanley has already indicated, house builders make investment decisions 12 to 18 months in advance, which requires a clear picture of what will happen to high loan to value mortgage lending after 2016. There is consensus that the scheme should not be permanent, and over half of MPs see a potential role for the private insurance sector in replacing the Government and minimising risk to the taxpayer. We believe that private involvement should be gradual and phased in through the life of the current Government scheme.”
