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FSA rejects high-LTV indemnity

The FSA has no current plans to look at mandatory mortgage indemnity insurance for lenders on higher loan-to-value mortgages, Money Marketing understands.

The Irish government is considering a mandatory requirement for lenders to take out indemnity cover on high-LTV mortgages. A source close to the FSA says it is not considering a similar approach.

Intermediary Mortgage Lenders’ Association executive chairman Peter Williams says: “My feeling is it does have a role and if you look at other countries it is widely used to help borrowers borrow over 80 per cent. There would be a lot of work to be done between lenders and insurers to make sure there is a product that works so lenders could be confident in the scheme.”

Emba group sales and marketing director Mike Fitzgerald says: “We would welcome something that unlocks higher LTVs but I am not sure this is the answer.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. What the market needs for First Time Buyers is a 95% LTV mortgage on a 4.99% Fixed Rate over 3 or 4 years with a MIGP (correctly called a MAP under FSA rules) – this would get the property market moving which would boost the economy to get us out of recession.

    The Taxpayer funded banks should be instructed tp get the ball rolling ASAP, as this would get other lenders into the market. For anybody that thinks that this is not possible, trying looking at what the Scottish Building Society are doing (although that are being super cautious and also asking for a Gurantee – but at least they are making an effor).

  2. Why not mandatory MPPI cover for the fixed period. After all redundancy or serious illness/injury preventing the borrower from keeping up their payments are the main reasons for defaults.

    Rather than running scared and only offering poor LTV deals, lenders should take the same view toward borrowers insuring their income as they do the risk of their property burning down; no insurance cover = no loan.

    It can be bought cheaply on-line and paid monthly, I am not advocating a return to lender-gravy-train single premium.

  3. Once again, the UK ‘lags’ the way. Instead of taking a sensible and proportionate response to the problem of high LTV borrowing, the response is a shrill cry of ‘BAN IT ALL’. Go back a couple of centuries and, no doubt, our esteemed regulators ancestors would have been the ones calling for the burning of witches.

    What is the likely result of this approach? Well, one predictable outcome is to choke off the supply of FTBs, producing a knock-on effect of market distortion as the housing market stutters along unable to recover.

    High LTVs are not inherently a bad thing. High LTVs that leave lenders exposed to market vagaries are. So why not let lenders protect their capital by insisting on appropriate insurance?

    If you ever were going to ban high LTV lending, the time to do it was probably 2005-2007 when over-inflated property values geared up the risk – but no. Instead, once again, now the horse is long gone, our regulators can be found fumbling around for a padlock.

  4. What possible reasons does the FSA have for NOT looking at Mortgage Indemnity Insurance ??

  5. FSA do not want high LTV’s – their primary intent to square the perfect circle is to eliminate house price inflation by controlling the market and teaching irrational consumers the error of their ways. Can’t allow people to make their own minds up, now, can we?

  6. It is a shame that high LTV’s are only available to those who are happy to forfeit advice. Would be the same with MIG’s. G’ment backed lenders will only make available direct, then before long they would start inflating the price by adding to the loan and new borrowers would probably end up in negative equity by the time they finished adding fees. FSA should stop trying to control social policy, no one voted for them and the people from the industry they secret police have almost nothing good to say about them. Over paid, under qualified, over bearing and now they have an overpowering attitude of “I have a big regulatory stick..” Shame the disbandment is just another political trick! As for MIG’s, seems a pretty sensible idea that worked well without folly in the past, why not again?

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