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Former CML chief predicts Help to Buy MIG will fail

Michael Coogan

Former Council of Mortgage Lenders director general Michael Coogan says the Government’s £130bn Help to Buy mortgage indemnity guarantee scheme is unlikely to gain support from lenders and boost the housing market.

Under the MIG scheme, set to launch in 2014 and run for three years, the Government will offer a guarantee of up to 15 per cent of the purchase price with the borrower putting down a deposit of between 5 and 15 per cent.

The Government is offering £12bn-worth of guarantees to lenders to fund £130bn of lending. If homes are repossessed and lenders lose more than the borrower’s deposit, they can access Government guarantees. 

The Government has not confirmed how much it will charge lenders for the guarantee.

Coogan says the cost of the guarantees may put lenders off signing up for the scheme while borrowers may also be dissuaded if the cost of the guarantee is passed on through higher mortgage rates.

Coogan says: “This was put forward as a politically populist proposal and if consumers start to realise there are some downside risks from that guarantee and the costs of it, the popularity might not be quite so high.

“I will be surprised if many lenders sign up.”

Chadney Bulgin mortgage partner Joanthan Clark says: “By announcing the scheme a year before it is launched with little or no detail, the Government has caused a great deal of confusion and speculation.”

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  1. If the government pays out on its guarantee, will it then pursue the borrower to get the money back?

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