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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

Action to tackle mortgage deposits problem is much needed, says CIH Scotland

29/06/2011


The Scottish Government’s announcement of £250,000 support for the development of a mortgage indemnity scheme for new build housing has been warmly welcomed by CIH Scotland. The funding is being provided to industry body Homes for Scotland to enable it to work with house builders and lenders to help bring down deposits to more manageable levels.

The Scottish Government’s announcement of £250,000 support for the development of a mortgage indemnity scheme for new build housing has been warmly welcomed by CIH Scotland. The funding is being provided to industry body Homes for Scotland to enable it to work with house builders and lenders to help bring down deposits to more manageable levels.

David Bookbinder, Head of Policy and Public Affairs at CIH Scotland, said:

“The Scottish Government’s support is very much to be welcomed and shows its keenness to address blockages across the housing market. But we shouldn’t underestimate the significant cash commitment which participating house builders will make to this mortgage indemnity scheme.

“Some previous schemes have involved insurance-backed guarantees, but with this one the builder will put a proportion of the sale proceeds directly into a pot to indemnify the lender against any future loss on redemption of the mortgage. It could allow mortgages of up to 95%, and this will help unblock the market as well as unlock land and increase supply.

"A future option for the Scottish Government is to consider the value of contributing to reducing deposits by providing a guarantee for a proportion of the mortgage, similar to the guarantees it is providing as part of the National Housing Trust initiative for mid-market rent. This wouldn’t involve actual cash but would be in the form of a notional commitment to pay out in the relatively unlikely event of a serious problem occurring in the future. Amongst other things this will enable house builders to make the indemnity scheme available to a greater number of people."


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