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Categories:Mortgages

Government reveals MIG scheme lenders

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The Government has revealed the names of the lenders that have signed up to its indemnity scheme announced today as part of its housing strategy.

It says Barclays, HSBC, Lloyds Banking Group, Nationwide, Royal Bank of Scotland, Santander and Yorkshire and Clydesdale Banks have agreed in principle to participate in the scheme, which will see them lend up to 95 per cent LTV on new-build property.

The Government will underwrite part of the risk on the loans alongside house builders.

Over 25 developers have agreed in principle to join the scheme, including Barratt, Persimmon and Taylor Wimpey, the three largest builders in the UK.

It says it hopes other lenders and builders will want to participate in the scheme.

Under the scheme, the builder will contribute 3.5 per cent of the value of each property sold under the scheme into an indemnity fund, with the Government supporting the fund to a total of 9 per cent of the property’s value.

The indemnity fund pays out to the lender if a property financed under the scheme is repossessed and there is a shortfall. Builders will take the first loss, with the Government only being called upon to pay once the builder’s fund has been exhausted.

Lenders and builders will retain the right to decide which builders and lenders they wish to engage with. The Government will establish a delivery group of lenders and builders to meet with on a regular basis to monitor the practical implementation of the scheme.

There will be a cap on the value of properties eligible for inclusion in the scheme.

The scheme will be delivered by the Department for Communities and Local Government and will be available in England only, although similar schemes are planned for Scotland and Wales.

The Government says it will conduct an evaluation of the scheme after two years, to ensure that there has been an appropriate and positive effect on the demand and supply of new build properties.

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Readers' comments (7)

  • So what happens if the loss is greater than 9%?

    Plus - for those not eligible - surely they will ask for a 3 1/2% reduction in the price....

    ....which probably means the builders have to put up the property prices by 3 1/2% to maintain some profit margin????

    What a waste of time....

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  • Our State can't support its own debt, so will encourage (naiive?) youngsters to participate in the property-owning lottery that should, if markets were to be allowed to work properly, be 30% to 40% lower than they actually are. Words escape me! (Apart from these few...)

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  • And what do those who don't want, can't afford, can't find etc a new build? What do they do?

    Enabling first time buyers to buy older properties can give a boost to the housing market and all of its ancilliaries new kitchens, decorating, etc etc etc which would help boost the economy.

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  • I was fully expecting the previous letter to continue after the ..........

    With an better idea to enhance the market? To openly belittle such a positive step to try and re-ignite a rapidly shrinking market should be applauded not shot down in flames.

    After reading the 'Paul Howard wants to stay in sector' article in Mortgage Strategy I sincerely hope it is your name sake and not you as such short sighted negativity will have us going backwards and not forwards.

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  • In principle this is just what the market needs. However without control it's just a developers license as they will just increase their prices to cover their risk. If the Government really wants this to work they need to ensure selling prices are real and competitive , indeed I would insist on a cost plus approach to pricing and they should extend the scheme to second hand housing where there is both more attractive pricing and it's greener to improve rather than build.

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  • I've got to ask, is this government mad, stupid or just corrupt or is it all three?
    Many economists put the root cause of the credit crunch as Clinton's similar scheme to help the uncreditworthy to get mortgages. If Cameron were not a venal idiot he would realise that what the young need isn't to get over-indebted, they need good jobs leading somewhere.
    Come on Sants, earn your crock of gold and stop this nonsense. Oh. sorry, you don't do sensible things, do you?

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  • Sorry have I missed something here.

    The bank charges interest (ie the risk premium) but doesn't take any risk - when it goes pear shaped, they pass it to the builders, then the tax payer.

    Oh go on then you have persuaded me says the boss of RBS & TSB to Mr Cameron

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