MIG-style guarantee could be on the cards

30 November 2009 | By Natalie Thomas

A new type of mortgage indemnity guarantee could return to the market in the form of equity guar-antees, according to the Association of Mortgage Intermediaries.

Robert Sinclair, director at AMI, says the insurance would help lenders offer more competitive LTVs and pricing.

He says: “In the Canadian housing market MIGs never went out of fashion and some lenders have been working out a way to make them more appealing in the UK.”

But he says the pricing and the structure of such products would have to be right.

Sinclair adds: “We don’t want to see a repeat of what has happened in the past whereby customers ended up with the liability.

“It’s a matter of structuring the product so it’s not too expensive for consumers while being beneficial for lenders. Equity guarantees would be one way of remortgaging customers on high LTV deals onto other products or helping them avoid repossession.”

Sinclair says this could become a post-election issue for both big political parties but any initiative is unlikely to be implemented until 2010/11.
Genworth Financial still offers MIGs in the UK and is campaigning for the Canadian system to be introduced here.

A spokesman for Gen-worth says: “In Canada all mortgages over 80% LTV must have MIGs. This means it is not as expensive for borrowers as the cost is spread across all lenders.

“The cost of a MIG in the UK is usually passed on through lenders’ APRs but it remains largely invisi-ble to borrowers.”