View more on these topics

Mind the gap and save the housing sector

For some time, customers buying cars have been able to get a reassuring add-on to their finance packages called gap insurance.

Could this facility also provide a way of restoring confidence among potential buyers in the housing market?

There are two main stumbling blocks to kick-starting the housing market. First, lenders are nervous about lending for fear of getting criteria wrong in a market that is difficult to predict.

Second, would-be buyers are hesitant to commit, fearing that property prices will fall further and push them into negative equity.

There has been a lot of debate recently about the possible return of mortgage indemnity guarantee policies which would reassure lenders offering loans of more than 75% LTV.

I don’t understand why this idea is not gaining more traction as it seems a straightforward solution to me.

And if, alongside this, there was a policy buyers could take out that indemnified them against a shortfall in the sale price of their properties, effectively filling the confidence gap, it could create market stability and get housing transactions moving again.

Of course, there would need to be a proper framework in place when constructing such a policy to ensure it not only provides the correct type of protection for customers but also gives insurers an incentive to develop it in the first place, but this should not be beyond the wit of man.

These policies been available for a while in the car finance industry, protecting against a shortfall between the eventual sale price of a vehicle and the outstanding finance facility available for buying it.

Extending that principle to the property sector isn’t such a wacky idea.

Necessity is the mother of invention and it strikes me that if ever there was a time for fresh ideas it is now.

Recommended

Consumers will turn to brokers

Being out and about a fair bit in my job gives me plenty of opportunity to speak to industry contacts on a regular basis.

Mortgage Intelligence offers 48 hour proc fee

Mortgage Intelligence is offering 48 hour procuration fees for Abbey’s latest exclusive 3.59% two- year fixed broker rate to all directly authorised members.

Towards a brighter future

Equity release is one of the few financial markets that is growing in the UK, but it is a sign of the times that this is probably because it is one of the few areas in which there is still an opportunity for advisers and lenders to make their mark.

Adviser Matrix expands offering

Adviser Matrix, the free independent research service for financial brokers, is now dealing with 17 networks and national IFAs.

Newsletter

News and expert analysis straight to your inbox

Sign up