Insurance aids building societies’ FTB lending

The vice-president of commercial operations at Genworth Europe, a mortgage insurance provider, argued that mortgage insurance is allowing building societies to provide higher loan-to-value products without engaging in risky lending.

Mr Crone said its latest client, the Hanley Building Society, had showed its commitment to first-time buyers by raising its level of lending in the past year by 17 per cent.

He said: “The mortgage market – and lending to first-time buyers, in particular – does seem to be undergoing a gradual recovery at present, but the battle is not yet won and there still needs to be a greater supply of home loans offering higher loan to values. Building societies have been quick to recognise and address this need without compromising their attitudes to risk.

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“No one is suggesting lenders return to the sort of reckless practices that saw mortgages offered at 100 per cent of the property’s value and beyond, but 90 per cent and 95 per cent home loans are vital if first-time buyer activity is to continue to track upwards.”

He also warned that a widely predicted uptick in the housing market would trigger even stricter deposit requirements in the immediate future.

The Building Societies Association recently reported that loans from its members to first-time buyers was up 50 per cent in the first five months of this year compared to the same period in 2012.

David Lownds, head of operations for Hanley Building Society, said the mutual had a “responsibility” towards first-time buyers. He added: “With the benefit of competitive mortgage insurance, we are able to lend within our risk tolerance.”

Adviser comment:
Andrew Morgan, director of Greater Manchester-based Now Financial Planners, said: “I think building societies are much more active in this area. Yes, banks are finding it hard to shake off bad press about their reluctance to lend. But there’s no smoke without fire, and we’re finding that mutuals are much more happy to offer decent rates in the long term for all kinds of buyers.”