Credit scoring for the Mortgage Guarantee Scheme (MSG) is perceived to be at a high level due to stringent lending, which requires further attention, according to Mike Brown, director of Crystal Clear Financial Services.
Chancellor Rishi Sunak confirmed the launch of the Mortgage Guarantee Scheme in the Budget.
As part of the scheme, the government offers incentives to lenders in order to bring back 95% loan-to-value (LTV) mortgages, which were removed from the market as a result of the pandemic.
Moneyfacts: Borrowers should consider deals outside of Mortgage Guarantee Scheme
Brown said: “Feedback from peers in the industry reveals that the area that could be improved is credit scoring, with perceptions being that credit scoring is at a high level.
“However, when the government are underwriting some of the risk, a degree of pragmatism around this would be beneficial in helping the scheme work.”
Brown goes on to explain that 95% LTV products have a place in the mortgage marketplace and provide hope to those considered within ‘generation rent’.
He added: “The creativity of lenders too is essential, such as the Nationwide Helping Hand scheme announced this week, which although locks them in for five years, is still a more positive outlook for those looking to buy than renting and trying to save for a bigger deposit.”
