The government’s proposed 99 per cent mortgage scheme has received mixed views from brokers who said they would only consider this for clients if it works effectively.
There have been reports that the government is looking to introduce a 99 per cent mortgage scheme to encourage first-time buyers onto the property ladder.
FT Adviser's sister publication, the Financial Times, reported yesterday (February 22) that chancellor Jeremy Hunt is drawing up plans for this scheme ahead of the Budget, which would only require home buyers to put down a 1 per cent deposit on their first home.
But advisers are not on board with this.
MortgageShop.com financial adviser, Gary Bush, said lenders currently operating in the higher loan amount arena are “already doing a good job”.
He questioned while 99 per cent mortgages are great to assist first-time buyers, without the much needed increase in affordable homes “how is this going to make affordability not a concern”.
Abbeydale Mortgages director, Richard Thompson, also had reservations about the scheme's viability.
“There’s uncertainty surrounding the enthusiasm of lenders to participate in this scheme, given the inherent risks involved,” he said.
“Overall, while the idea may seem appealing on the surface, careful consideration of its potential repercussions is crucial before its implementation.”
Positivity
But some brokers were more positive, such as Fairview Financial Management director and chartered financial planner, Ross Lacey, who said: “We will certainly consider these in the right circumstances.
“It will certainly help some first-time buyers who have the income to support the borrowing, of which there are many currently renting.”
Additionally, Charwin Private Clients director, Ranald Mitchell, said the initiative will “certainly” help first time buyers get their foot on the property ladder.
He added that struggling to save for an adequate deposit was one of the main grievances in the market today and that he is confident those taking advantage of the scheme would be in a sustainable position.
Meanwhile, the Mortgage Uni mortgage expert, Peter Stamford, said if the scheme is launched correctly and people are able to use it effectively to buy a property it would be “madness as a mortgage adviser to not get involved”.
However, he cautioned this take-up was conditional, saying that if there are a “million unattainable barriers” then he might choose to focus his efforts elsewhere.
Support was also shown by Sett Mortgages owner, Elliott Benson, who said his entry into the 99 per cent market would depend upon which lenders offer it and what the criteria will be.
“It’s just going to be useless posturing if lenders will make it impossible for a client to pass credit scoring for a 1 per cent deposit or if there are endless hoops to jump through.”
Lenders
Mortgage lenders also shared their reaction to this scheme as Coventry Building Society head of intermediary relationships, Jonathan Stinton, commented: “There’ll be a collective cheer around the industry if the government announces concrete plans to help first buyers.”
However, this would only be the case if it’s a scheme which is designed to build long term stability.
“A scheme which risks pushing up house prices too quickly or comes with an end date, which could easily turn into a cliff edge, would most likely be met with a collective sigh,” he added.
Additionally, he said what Coventry wants to see is the government learning from past mistakes and bringing something which will “steady the ship rather than rock the boat”.
Stinton also said that the details need to be properly thought about and all angles need to be considered for first time buyers to get the lasting help they deserve.
tom.dunstan@ft.com
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