The Government has revealed that its maximum liability for the recently announced mortgage indemnity scheme will be no more than £1bn.
The scheme, announced last week as part of the Govern-ment’s housing strategy, aims to increase the amount of mortgage finance for newbuild homes, allowing up to 100,000 families to buy a property.
It will see housebuilders deposit 3.5 per cent of a property’s sale price into an indemnity fund for seven years, after which they will get their money back, minus any losses.
The Government will underwrite 5.5 per cent of the purchase and the borrower will have to put up a 5 per cent deposit.
The autumn statement this week says: “The Government will take on a contingent liability which will build up in line with purchases under the scheme to a maximum of £1bn.”
Lentune Mortgage Consultancy director Stuart Gregory says: “I think there are more effective ways to use the money. If the Government wants to boost the economy and get the housing market moving, then extending the stamp duty holiday would have made a bigger difference.”