HTB2 - let's hope success breeds success

‘Success breeds success’ goes the saying, and perhaps judging by Team GB’s recent performance at the Rio Games, following up on London 2012, then you’d have to say there’s some merit in this.

Related topics:  Mortgages
Patrick Bamford
15th September 2016
patrick bamford genworth
"The CML appears to be in two minds saying yes the scheme has been good, but it’s a positive that lenders are now operating outside it."

There’s no doubting that the Olympic association, and many individual sporting bodies within it, have benefited from the increased resource and investment put into it over the past two decades, but they have also had to find systems and processes to turn this into much improved performances and podium finishes. Future investment is predicated on continued success and it’s heartening to see how many sports were able to step up to the plate and deliver.

We all know that the landscape in the UK – whether it be sporting or otherwise – is not always like this. How often have we seen success squandered, ignored, over-analysed, or simply jettisoned? There are no guarantees that you will be able to perform, grow, or develop positively year after year – unless it would seem you’re the All Blacks rugby team – but having that foundation of success to build on, should make it easier to do so.

I have been reminded of this lately, within our own field, when looking at the variety of housing schemes that have been introduced by the Government over the past decade or so – certainly since the Credit Crunch. Not all have been successful, indeed I might even suggest there have been more losers than winners.

To give you some idea of the ‘hit rate’ of these schemes, the CML’s recent review of the Government’s Help to Buy Guarantee Scheme (HTB2) was entitled, ‘A government scheme that worked’. Perhaps showing what a rarity this could be deemed. But, in this case, there’s no argument that HTB2 has achieved the job it set out to, if perhaps throughout 2016 with less activity than we might have wished.

For instance, in its review, the CML provided a list of positives which show just why HTB2 can be deemed to be a success. These were:

- Of the 79k loans made, 95% of them have been outside London.
- The average LTV has been 94%; compared with 65% outside the scheme.
- The average borrower age has been 30, compared to 38 outside the scheme.
- And nearly 80% of all HTB2 borrowers have been first-time buyers.

When it was set up, the scheme was supposed to help younger first-timers, predominantly outside the capital, buy homes with small deposits. Judging by those stats above, I think it can be very happy with its achievements.

And yet, the scheme (as it currently stands) will finish at the end of the year. Indeed, as mentioned above, lenders have been less inclined to be active within the scheme, with some preferring – particularly this year – to launch products, and operate, outside it. And yet, no-one would deny, that the fundamental positives which come from HTB2 are still much required. Will, for instance, lenders continue to be so active outside the scheme as they were (initially at least) within it?

The CML appears to be in two minds saying yes the scheme has been good, but it’s a positive that lenders are now operating outside it. It says that closing the scheme won’t have too big a distorting effect, however if lenders don’t continue to play in this space then many potential homeowners might not get on the ladder. Finally, it says an insurance scheme like this ‘could be helpful’ but sees no reason to keep HTB2 going.

Which all seems to point in the direction of private mortgage insurance, and one presumes a ‘hope’ lenders might continue to offer high LTV mortgages with the risk mitigant being private insurance not the Government guarantee. Now, given this is easily achievable – and we at AmTrust would certainly want to be heavily involved – and the positives are plain to see, might it be possible that we will see both Government and trade body noises made, and influence brought to bear, on lenders who have operated inside HTB2 to use private insurance when they leave it, and to keep lending in this space at higher levels?

We sincerely hope so, because if not and lenders choose to move further away from this type of lending, then I’m afraid we’re going to see far less first-timers being able to purchase their own home – which just so happens to be a stated desire of the new Prime Minister, Theresa May. The HTB2 may no longer be required, but its results and its lending reach, certainly are – undoubtedly this is achievable without Government intervention, and is perhaps even desirable given it won’t be the taxpayer on the hook for the guarantee, but we suspect it may require some encouragement to lenders to ensure we do not see these types of loans fall even further in supply. HTB2 – a success undoubtedly but one that needs to be vigorously followed up on.

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