Several lenders have already announced that they will be offering mortgages under the scheme. This means that there is likely to be an increase in the availability of high loan-to-value mortgages as the guarantee scheme should enable the lending industry to have greater confidence in making mortgages available to creditworthy borrowers with low deposits.
Borrowers must expect their ability to afford repayments on the mortgage to be assessed as rigorously as an application for any other mortgage; indeed, from the perspective of the borrower, there is no practical difference between a mortgage that is supported by a Help to Buy guarantee and one that is not.
As for lenders, it will be left to their commercial judgment as to whether to participate in the scheme or not. Some may take the view that they already offer some mortgages at high LTVs with out a guarantee, and may not wish to increase lending at this level.
The CML also welcomes the oversight function of the Bank of England Financial Policy Committee over the scheme, as well as its more general oversight of conditions in the housing market. Independent checks and balances to ensure that unintended consequences do not arise from the policy intervention are sensible and proportionate.
CML director general Paul Smee said:
"Borrowers who simply haven't yet managed to save a large deposit but are able to manage the repayments on a loan are already seeing an improvement in the mortgage choices available to them, and this will increase with the advent of the Help to Buy mortgage guarantee scheme.
"As the mortgage market continues to unfreeze, assisted by Help to Buy and Funding for Lending, an increase in the supply of new housing will be a crucial factor in success. The homes need to be there for people to buy, as well as the finance to buy them.
"The key benefit of the scheme is in providing additional security to lenders, and so making it more likely that they will be willing to make loans to creditworthy borrowers with modest deposits."
