Mortgages  

Lenders need mortgage insurance: Genworth

The UK business development director for mortgage protection insurer Genworth, said government incentives for the major banks to take out the insurance in the form of capital relief could ease the pressure on the taxpayer and increase lending.

He said: “The FSA has allowed and encouraged building societies to use credit risk mitigants such as mortgage protection insurance, and this has translated to an increase in mortgage lending. Encouraging the banking industry to do the same could be a catalyst for increased lending on a much wider scale.”

Currently, the banks have to set aside funds to mitigate any loan default, which in turn restricts the amount they can lend, especially on the higher LTV mortgages.

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Mr Bamford added: “The capacity in our industry is available, and could help give a massive boost to the mortgage market. If the government offered these lenders capital relief, it would mitigate against the cost of taking out mortgage insurance and would enable high LTV mortgages to become more affordable.”

Adviser views

David Hollingworth, associate director of communications for national mortgage adviser London & Country Mortgages, said: “Any solution that can broaden the availability of mortgage products for first and next-time buyers and help them meet deposit requirements has to be a good thing. From our experience, the demand is there. What would trigger the lenders in taking up this type of protection would be capital relief. Without it, these products would still be very expensive. The lenders need that incentive.”

Jane King, principal of London-based Ash-Ridge Asset Management, said: “The idea is all very well, but I don’t think the big banks are that interested in it. What would you actually insure against? And how could you do it fairly and equally? This would need to be worked out as it could potentially cause a lot of damage to the mortgage industry, it would risk good governance on behalf of the lenders, and wouldn’t necessarily translate to better deals for customers.”