Haart Shows How To Turn Lead Into Gold
Paul Smith, (Chief Executive of Spicerhaart) discusses how the biggest challenge facing the estate agency industry during 2009 will be the lack of mortgages available to buyers.
State-funded lenders such as Bradford & Bingley and Northern Rock are prepared to offer 70 per cent loan-to-value (LTV) mortgages but are too worried about the risk of falling house prices and unemployment to lend at the 90-95 per cent the market needs.
The Chancellor recently announced the Government was considering an insurance scheme funded by the taxpayer whereby it would, in effect, underwrite potential losses on tranches of existing mortgage debt so that lenders would not have to worry about exactly how much of each tranche is toxic.
The insurance cover would allow banks to treat these tranches of loans as all good and free up some capital for more lending.
So why doesn’t the Government simply extend this taxpayer-backed insurance scheme to new tranches of loans?
The extra 20-25 per cent of LTV is still risky but the insurance will allow the banks to lay off this risk and return to lending.
That way, the risk would be spread, first-time buyers will get back on the ladder and we will see a greater volume of activity in the market.
Plus, we will finally see some results from all the money that the Chancellor has pumped into the banking sector — and not just objectionable bonuses for those who need it least.
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