Mortgages  

Insurers well placed for Help to Buy exit strategy: Crone

The vice-president of commercial mortgage insurance Europe at Genworth said the government should turn to insurers to ensure the Help to Buy mortgage guarantee scheme does not result in another housing market bubble.

If a Help to Buy succession model is not put in place within 12-18 months, Mr Crone warned, the boost the scheme has given to the housing market would wane.

He said: “We should not underestimate the importance of an exit strategy, particularly to stakeholders such as housebuilders, which are going to rely on high loan-to-value mortgage product availability staying strong for a lot longer than three years.

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“As a report by Morgan Stanley highlighted last year, builders tend to have a lead-in time of 12-18 months for building and bringing a new property to market.

“This means that by the middle of next year, they are going to need to know if there will be credit availability in 2017 to allow borrowers to buy their newbuilds.”

Mr Crone warned that if builders were not given this certainty, the momentum that has been built up prior to this point would start to tail off.

He warned: “In essence, builders may stop building if they feel the high LTV mortgage finance is not going to be there for access by small-deposit borrowers.”

Mr Crone said a look at any of the leading countries that had provided a state mortgage guarantee would show they had worked with the private insurance sector on either a full or partial handover to ensure such a cliff edge did not occur.

He said the private sector had the appetite and capacity to play a leading role in any Help to Buy exit strategy and argued there were clearly many benefits to insurers stepping in, not least because the money that would be taking any potential first loss would be private, rather than coming from the taxpayer.

Adviser view

Simon Webster, managing director of Ashford-based Chartered Financial Planners Facts & Figures, said he believed the effect of Help to Buy on the housing market had been overhyped.

He said: “What is vital is that the lenders are in a position to continue to offer 95 per cent LTV deals when Help to Buy is finally pulled.”