NEWS ........... "Government to underwrite mortgages for first-time buyers"
UK Government 95%
first time buyers mortgage scheme
Quotes and advice
The UK Government has announced a new incentive to
attempt to kick start the stagnating UK housing market and at its core
is a new idea to subsidise first time buyers deposits by underwriting
the deposit from its own public purse. The idea being that first time
buyers will only need to find a 5% deposit as opposed to the 20% now
demanded by the banks.
It was only a few years ago that the Government
injected massive amounts of public money into the UK banking system to
prop them up and keep the economy fluid, however it seems that the
banks have not kept their promise to continue lending and instead have
simply stabilised their own businesses instead of the established
lending system that has been in operation for as long as anyone can
remember and worked well for first time buyers with only 5% deposits
So once again the Government is stepping in to try
and help the first time buyer, the ailing housing market and all the
jobs that depend on it.
The banks are quite capable of lending to first
time buyers with only a 5% deposit but are ruled by the indemnity
insurers that underwrite them. The new first time buyer scheme
announced by the UK Government aims to sidestep this problem by
indemnifying the banks from its own public funds.
Some might say that it is an example of
nationalising the indemnity industry, but as it only applies to
first time buyers it can hardly be called that.
First time buyers are the life blood of the housing
market, because without them entering at the bottom level the existing
owners cannot move up the ladder or relocate to similar housing for
other reasons like job moves or family relocations.
Historically a first time buyer had to save a
deposit with a building society, and when the local manager deemed
them "worthy" qualified to be a borrower. Then the banks stepped in
and competed with the building societies. The first time buyers now
had more choice and more say in where to get their mortgage. Then the
insurance companies joined the banks in the free for all and the first
time buyer was swamped with hundreds of mortgage choices. The
"mortgage books" became valuable "tradable" assets and the banks were
quick to sell their "mortgage books" on to raise more money to lend.
However, once the system of selling "mortgage
books" became established and accepted, the banks started to lend to
non credit worthy borrowers and sell those "books" on as well. Before
long the buyers became aware that they had some bad assets on their
hands lost trust in the banks and their decision makers.
The losers in all this were the first time buyers
who had come to depend on the banks and building societies for their
first mortgage, and the UK tax payer who's money was used to bail out
the failing disreputable banks.
The Governments announcement to underwrite first
time buyer mortgages , and take the responsibility away from the
banks, is testament to the Governments total mistrust in the banking
system to do the job it declares it is capable of, yet by its own
actions, proves it is not.
The new Government first time buyer scheme,
allowing the return of the 95% mortgage for first time buyers, could
be the beginning of the long awaited for recover of the UK housing
market and the revival of the first time buyer mortgage sector that so
many in the housing and property industry depend upon, as well as the
children of yesterday to start a new life.
Your home may be repossessed if you do not keep up repayments on
No information on this website is intended to constitute advice.
This site contains a summary of the information relating to the
products and is not intended to promote any specific mortgage or
insurance product or provide mortgage or insurance advice. It is for
information purposes only.