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Deadlock over HomeBuy

Government scheme has enormous potential but minister refuses to relent on subsidies and tough regulations

The Government is again urging lenders to get involved with its HomeBuy scheme but has rejected industry pleas to provide subsidies and ease stringent regulations.

Speaking at an all party Parliamentary group on debt and personal finance, minister for housing and planning Yvette Cooper said that much greater private investment was required in the shared-equity scheme but dismissed calls for up-front financial support and cutting red tape.

GMAC-RFC executive chairman Stephen Knight also spoke to the group, saying shared equity was a potential solution to the problem of first-time buyers being priced out of the market.

However, he suggested that the Government should provide initial funding which would be returned by lend- ers in payback schemes as the equity values grow with house price increases.

He warned that lenders would not get involved unless sale regulations were relaxed. He said HomeBuy borrowers should receive a generic statement at the point of sale, preventing the need for lenders to spend more on IT devel- opment. Knight also warned that the projection figures of interest required to be shown to buyers are unrealistic and offputting.

Cooper said lender concerns about regulatory burdens of the new scheme need to be balanced against the FSA having to ensure that past troubles, such as endowment misselling, are not repeated.

Labour MP Sarah McCarthy Fry also backed the tough regulations to avoid misselling and dismissed Knight’s concerns that buyers will be put off by the high projection figures for potential interest repayments.

Only three lenders have so far signed up for the HomeBuy scheme – HBOS, Nationwide and Yorkshire Building Society.

Knight expressed concerns over what he sees as a clever Government initiative which is not receiving the support it deserves because of the barriers to lender involvement.

He claimed that the HomeBuy scheme could be opened up to a potential 400,000 first-time buyers if the Government were to more flexible.

Knight said: “If the project could be freed up from the current rules as to who qualifies, and what lenders can offer, we could achieve real market impact with shared equity. We have also argued for borrowers of a shared-equity product to receive a generic statement at point of sale that demonstrates the equity that they would be giving up in a range of growth scenarios.”

Cooper also stressed the need for the supply of houses to be increased to meet growing needs. She said: “We need much more private sector involvement. Why should it need Government subsidy? On regulation, we have to be proportionate. The FSA has to take past troubles into account.”

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