A key Government scheme to kick-start the mortgage market is not working, MPs said today.
The Communities and Local Government (CLG) Select Committee said in its current form the £50 billion asset-backed guarantee scheme (ABS) was “doomed to fail”, and it called on the Government to take further steps to boost mortgage lending.
The ABS, which was announced in this year’s Budget, provides guarantees on lenders’ mortgage-backed securities, enabling them to sell on mortgages to investors, raising new money to lend to consumers.
But there are restrictions on which institutions can take part in the scheme, while only bundles of loans with the high AAA credit rating can be used.
The mortgages being securitised must also have been written after January 1 2008, while they cannot have had a higher loan to value ratio than 90% when they were first arranged and the homeowners must not have adverse credit histories.
Dr Phyllis Starkey, chair of the committee, said: “In its current form the ABS is a leap that reaches across only half the chasm: impressive, but doomed to fail.
“If we are to meet house-building targets, then CLG ministers and senior officials must maintain pressure on the Treasury to bring forward new measures to get the mortgage markets moving.”
She added: “We welcome the additional investment the Government has made in building homes for social rent and in low-cost home ownership.
“But this won’t on its own be enough to meet demand. The availability of private mortgage finance is crucial, and the key to unlocking that finance is the Treasury’s asset-backed guarantee scheme.”
The report also called on the Government to ensure that skills and capacity were not lost from the UK’s building sector.
It warned that it took 10 years to rebuild capacity in the construction industry after the last recession.
It also said Government policy was too focused on promoting homeownership, with insufficient attention given to the rental sector.
Ms Starkey said: “We now need a vigorous debate to review this approach and formulate a more coherent vision to guide effective housing policy and investment into the future.”
A Communities and Local Government spokesman said: “The Select Committee Report recognised the significant additional investment in building new homes.
“We continue to do all we can to help the housing market and are working hard with the Treasury and Council of Mortgage Lenders to improve access to mortgages and last month announced a series of measures to help safeguard or create 45,000 jobs in the housebuilding industry.
“We know it is important for people to have a range of housing options which is why we commissioned the Rugg Review, a study into the private rented sector, and responded with ways to help and protect tenants.”
Kay Boycott, Shelter’s director of communications, policy and campaigns, said: “The Communities and Local Government Select Committee is right to highlight our obsession with home ownership and we welcome a debate on how future housing policy can help address this.
“Key to this debate must be how we make renting more attractive – in particular improving standards in the private rented sector and providing private tenants with far greater protection.
“That’s why we are calling on the Government to push through its proposals to improve private renting by introducing mandatory landlord registration, and encourage greater investment in new housing for private rent by institutional investors.”
Conservative shadow housing minister Grant Shapps said: “Once again, ministers have demonstrated their inability to get beyond headline-grabbing housing announcements which later turn out to be empty.
“From estimates of more than 50,000 repossessions through to mortgage misery, this Select Committee report demonstrates that this Government’s housing record has dramatically failed families up and down the country.”
Look it’s all a con there not real check a pot hole near you tommorow.. Only joking 
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