Comment tax-funded mortgages are not sustainable - John Phillips, Just Mortgages

07 October 2020

“The government’s aspiration to get more people on the housing ladder is laudable and something that most people would be in favour of. However, guaranteeing such mortgages with tax payer money cannot be the way to go at a time when the national debt is growing by the day.

“If the government wants lenders to bring back higher LTV mortgages then surely the sensible thing to do is to reintroduce a Mortgage Indemnity Guarantee (MIG) scheme. These were widespread up until the year 2000. Paid by the borrower the MIG protected the lender against loss in the event of the borrower stopping paying their mortgage. While some considered it unfair that the borrower paid the insurance premium it did ultimately benefit the borrower as it ensured a large number of high LTV mortgages. If the government really does want to bring back high LTV mortgages this has to be the way forwards as mortgages guaranteed by the tax payer are clearly not sustainable at a time when government borrowing has now exceeded our annual GDP.”