The Council of Mortgage Lenders has warned the government against being over-ambitious in its ‘starter home’ policy.
The government has announced plans to build 100,000 starter homes across England over the next five years.
These would be sold to first-time buyers at 20 per cent below the open market value.
Only people aged under 40 years old and who had not previously owned a home would be able to buy one.
But in its response to the department for communities and local government’s consultation on the scheme, the CML has said some lenders may not be enthusiastic about it.
It said: “Many lenders take a prudent approach and spread risk by limiting exposure to different types of lending. This includes lending against newbuild properties, and may include a limit on the number of properties a lender is prepared to accept as security on each development.
“Lenders are likely to apply their standard lending policies to the scheme, and some firms may therefore choose to limit their involvement in lending under this scheme or not to lend at all.”
The CML added that lenders would be unlikely to want to combine this scheme with others which already exist to help first-time buyers such as Help to Buy.
Lincoln Brown, managing director of Suffolk-based Larkbridge Mortgages, said: “Help to Buy has done particularly well and I can understand why they are doing it. It is the same thing without the 20 per cent loan.
“If someone is buying a house for 80 per cent of its true value the lenders might think they need more equity on it, and the housebuilders will want to make money on it.”