LONDON: Insurers could help get the mortgage market moving again by sharing some of the risk with housebuilders to make it easier for first time buyers get a foot on the housing ladder, the Home Builders Federation (HBF) said in an interview on Monday, July 4.

The only viable way to unfreeze the mortgage market is for third parties to bridge a so-called "deposit gap", as high deposits continue to keep first time buyers at bay.

"The only long-term solution to this is that we get a proper insurance-based solution by third party insurers, who are after all experts," said John Stewart, director of economic affairs at the HBF.

"Housebuilders cannot go on locking up capital in shared equity, the industry already has got about £1 billion (RM4.82 billion) locked up.

"That is not a long-term sustainable solution," he said. Lenders, though, are resisting a return to mortgage indemnity insurance because of its past reputation.

Data on Monday highlighted the plight of the industry, with housebuilding shrinking for the second time over the past three months, against a wider backdrop of weak consumer spending.

Lenders are reluctant to return to high loan-to-value (LTV) mortgages due to regulatory constraints, an outlook unlikely to change over the next few years, said Stewart.

"I am really concerned that you may not get back to 95% (LTVs) on any scale at all, because of (regulation) particularly... and also the FSA (Financial Services Authority) mortgage market review. One assumes that it is going to be tighter regulation," said Stewart.

A first time buyer has to find a deposit of £30,000 on average, which locks out a huge proportion of young buyers that have no recourse to parental support because house prices remain stubbornly high.

The situation is also exacerbating a long-term housing shortage.

"Rents are going up, student debt, the labour market is very poor for young people, and the high prices of housing. You add all those together... this is a massive social and economic issue," said Stewart.

Housing minister Grant Shapps would host a summit yesterday to discuss lending conditions and is expected to call for more mortgage products that help friends club together to buy a home.

A number of proposals and products have been put on the table with lenders and housebuilders getting together to discuss ways of lending at higher LTV ratios, while Shapps recently fleshed out details of a government-backed loan scheme. — Reuters

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