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Chancellor Rishi Sunak confirmed the launch of the Mortgage Guarantee Scheme in the Budget.
As part of the scheme, the government offers incentives to lenders in order to bring back 95% loan-to-value (LTV) mortgages, which were removed from the market as a result of the pandemic.
Brown said: “Feedback from peers in the industry reveals that the area that could be improved is credit scoring, with perceptions being that credit scoring is at a high level.
“However, when the government are underwriting some of the risk, a degree of pragmatism around this would be beneficial in helping the scheme work.”
Brown goes on to explain that 95% LTV products have a place in the mortgage marketplace and provide hope to those considered within ‘generation rent’.
Lending must return to ‘normal’ trading before 95% LTV products begin to be rolled out, according to Mike Brown, director of Crystal Clear Financial Services.
Prime Minister Boris Johnson has announced plans to turn Generation Rent into Generation Buy through encouraging lenders to resume lending at 95% LTV.
Under Johnson’s proposal, banks would no longer be required to ask applicants about the finer details of their earnings and outgoings.
However whilst Brown believes that the aspiration for Generation Buy is a good idea, he detailed that it is something which needs to be carefully worked through.
He said: “If something like this were to be rolled out, the impact on brokers at present would be too much, demand would outstrip supply, and significant amounts of time would be spent working through options with clients.