Britain launches mortgage plan, tries to sign up more banks

Reuters

By Christina Fincher

LONDON (Reuters) - Britain will on Tuesday launch a much debated program to help people buy their own homes and set out the small print it hopes will persuade more of the country's big banks to take part.

RBS and Lloyds , both of which are part-owned by the government, have said they will start marketing state-backed "Help to Buy" mortgages this week. Smaller lenders Virgin Money and Aldermore have also agreed to sign up.

But talks with other big lenders have gone down to the wire.

Banks such as Barclays and HSBC want to see how much capital they must set aside to cover loans to homebuyers who may put down deposits of as little as 5 percent.

Prime Minister David Cameron and his finance minister George Osborne brought forward the launch of the program to this week from its original start date in January.

They dismiss concerns that the program will fuel a boom-bust cycle in British housing. They say it will help people who have been frozen out of the property market by the big deposits sought by banks which remain wary after the financial crisis.

Critic says the plan was rushed out to give the government a boost ahead of a 2015 general election, just as former Conservative prime minister Margaret Thatcher reaped the popularity of a program to allow people to buy homes they rented from local authorities in the 1980s.

The opposition Labour party says Help to Buy will not fix the fundamental problem of low levels of housebuilding.

"Unless George Osborne acts now to build more affordable homes, as we have urged, then soaring prices risk making it even harder for first-time buyers to get on the housing ladder," said Labour lawmaker and finance spokesman Chris Leslie.

How popular the scheme will be will depend largely on how regulators view the state guarantee. The government is prepared to run up a liability of up to 12 billion pounds ($19.30 billion) - enough to support 130 billion pounds of new mortgage lending. But take-up could be much lower than that.

The main attraction for lenders will be the ability to offer high loan-to-value mortgages without tying up punitive amounts of capital. Most attention on Tuesday will focus on an announcement from Bank of England regulators, expected around 0600 GMT, on how they will require banks to treat the mortgages.

"The key factor will be capital relief," said Matthew Pointon, a housing economist at Capital Economics.

In exchange for the guarantee, the government will charge a fee of up to 0.9 percent of the loan's value. This is designed to cover any losses to the taxpayer, if borrowers default, and to comply with European Union state aid rules.

The scheme was first announced in March when Britain's housing market and its economy looked in need of help. Since then, property prices have jumped - particularly in London - leading to fears the scheme could cause a new bubble.

A survey by the Royal Institution of Chartered Surveyors showed on Tuesday that British house prices rose at the fastest rate in 11 years in September and sales hit a four-year high.

A cross-party committee in parliament, which has criticised the scheme in the past, said it remained concerned. "Mistakes could distort the housing market or carry threats to financial stability," the Treasury Select Committee said on Tuesday.

($1 = 0.6219 British pounds)

(Reporting by Christina Fincher; editing by William Schomberg/Mark Heinrich)

View Comments (0)

Recommended for You

  • Hurricane-strength winds pummel Europe, four killed

    By Michael Hogan HAMBURG (Reuters) - At least four people were killed on Tuesday when hurricane-force winds lashed northern Europe in one of the most severe storms in years, forcing flights to be canceled and disrupting road, train and marine traffic. The Dutch meteorological office issued a red…

    Reuters
  • United States sets official strategy for Paris climate talks

    By Valerie Volcovici WASHINGTON (Reuters) - The Obama administration on Tuesday published plans to cut greenhouse gas emissions up to 28 percent below 2005 levels by 2025, part of a strategy to generate momentum for a global agreement later this year on combating climate change. The formal…

    Reuters
  • Air and sea traffic disrupted as 120 km winds batter Netherlands

    Spring storms battered the Netherlands with gusts of up to 120 kilometers an hour on Tuesday, causing Amsterdam's Schiphol airport to cancel flights and the closure of two container terminals at the port of Rotterdam. Gale force winds sweeping in from the North Sea disrupted land and marine…

    Reuters
  • Heavy rains trigger flood fears in Kashmir; 17 dead

    By Fayaz Bukhari SRINAGAR, India (Reuters) - Heavy rains and a landslide in the Himalayan region of Kashmir killed 17 people, police said on Tuesday, as Indian authorities continued working to rescue stranded villagers, with unseasonal rains raising fears of flash floods in the mountainous north. …

    Reuters
  • Ocean warming suggests 50 percent chance of El Nino-Australia

    By Colin Packham SYDNEY (Reuters) - Recent warming of the Pacific Ocean may signal an El Nino weather event is forming, the Australian Bureau of Meteorology said on Tuesday. Climate models indicate the central tropical Pacific Ocean is likely to continue to warm, with El Nino thresholds to be…

    Reuters
  • Vanuatu risks long-term food insecurity after monster cyclone: U.N.

    By Alisa Tang BANGKOK (Thomson Reuters Foundation) - The monster cyclone that hit Vanuatu earlier this month wiped out more than 90 percent of the archipelago's crops, putting its people at risk of a secondary emergency and long-term food insecurity, the United Nations warned on Monday. Tropical…

    Reuters
  • Heavy rains trigger flood fears in Kashmir; six dead

    By Fayaz Bukhari SRINAGAR, India (Reuters) - A landslide in the Himalayan region of Kashmir killed six people and left 10 missing, police said on Monday, as unseasonal rains swept India, damaging crops and raising fears of flash floods in the mountainous north. Hundreds of people fled their homes…

    Reuters
  • Harsh weather cripples fishing and tourism on Cameroon's coast

    By Elias Ntungwe Ngalame KRIBI, Cameroon (Thomson Reuters Foundation) - For over 15 years, Raoul Meno has been fishing the waters off the coastal town of Kribi in southern Cameroon. A bout of persistent heavy rains and surging tides this year has made fishing in Kribi increasingly difficult and…

    Reuters
  • Air Canada plane landed short, hit antennas in Halifax accident

    By Mark Blinch HALIFAX, Nova Scotia (Reuters) - An Air Canada plane that suffered heavy damage in an accident in the east coast city of Halifax on Sunday landed short of the runway and hit an antenna array, losing its landing gear, safety officials said. "They touched down 1,100 feet (335 meters)…

    Reuters
  • U.S. to submit plans to fight global warming; most others delay

    By Alister Doyle and Valerie Volcovici OSLO/WASHINGTON - The United States will submit plans for slowing global warming to the United Nations early this week but most governments will miss an informal March 31 deadline, complicating work on a global climate deal due in December. The U.S.…

    Reuters
  • Modi's popularity in rural India punctured by discontent, suicides

    By Mayank Bhardwaj VAIDI, India (Reuters) - Over a dozen debt-laden farmers have committed suicide in recent weeks in India, and discontent in many rural areas against government policies is turning into anger against Prime Minister Narendra Modi less than a year after he swept into office. …

    Reuters
  • Chile desert rains sign of climate change: chief weather scientist

    By Rosalba O'Brien SANTIAGO (Reuters) - The heavy rainfall that battered Chile's usually arid north this week happened because of climate change, a senior meteorologist said, as the region gradually returns to normal after rivers broke banks and villages were cut off. "For Chile, this particular…

    Reuters
  • Mexico unveils national strategy for Paris climate talks

    By Valerie Volcovici WASHINGTON (Reuters) - Mexico on Friday said it will cap its greenhouse gas emissions by 2026, becoming one of the first countries to formally submit its national climate plan to the United Nations ahead of a climate summit in Paris in December. Mexico's Foreign and…

    Reuters
  • Fed must take account of global economy in U.S. outlook: Yellen

    SAN FRANCISCO (Reuters) - The Federal Reserve must take the global economy into account when judging the U.S. domestic outlook, Federal Reserve Chair Janet Yellen said on Friday, noting that a stronger dollar buoyed by weakness abroad may restrain U.S. exports Still, she added, U.S. consumer…

    Reuters
  • In reversal, crash-hit Lufthansa agrees to two-crew in cockpit rule

    Lufthansa said on Friday it would introduce new rules requiring two crew members in cockpits at all times, a swift reversal after its CEO said such a change was not needed despite the crash at its Germanwings subsidiary. The European Union said it would now advise all EU airlines to require two…

    Reuters
  • Sierra Leone capital 'eerily quiet' amid Ebola lockdown

    By Umaru Fofana FREETOWN (Reuters) - The capital of Sierra Leone was "eerily quiet" on Friday at the start of a three-day national lockdown aimed at accelerating the end of an Ebola epidemic in the worst affected country. Liberia has just one known case left and the three countries have set a…

    Reuters
  • Lufthansa to toughen up cockpit rules

    Lufthansa said it will introduce new rules requiring two crew members to be in the cockpit at all times after one of the pilots at its Germanwings unit crashed a plane in the French Alps. Prosecutors believe Andreas Lubitz, 27, locked himself alone in the cockpit of the Airbus A320 on Tuesday and…

    Reuters
  • Poland to charge two Russian officials over Kaczynski plane crash

    Poland said on Friday it would bring charges against two Russian air traffic controllers over a 2010 plane crash which killed then Polish president Lech Kaczynski, a move likely to damage bilateral relations already strained by the Ukraine crisis. Prosecutor Ireneusz Szelag from the District…

    Reuters
  • Drought, warm weather bring 'smog day' memories in California

    By Sharon Bernstein KINGS COUNTY, Calif. (Reuters) - The brown haze over California's San Joaquin Valley breadbasket on some winter days has been an unwelcome reminder of the bad old days, when pollution hung so thickly that people were warned to stay inside. Years of tight environmental rules…

    Reuters
  • India turns to 'satellite god' for crop mapping

    By Ratnajyoti Dutta NEW DELHI (Reuters) - Sher Singh, a farmer from India's desert state of Rajasthan, prays to Varuna, the Hindu god of water, for a bountiful harvest. Prime Minister Narendra Modi wants to promote a "per drop, more crop" approach to farming to make better use of scarce water,…

    Reuters