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FLS = Fig Leaf Scheme?

Posted by: katalysis

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The much-trumpeted Funding for Lending Scheme will see the taxpayer underwrite mortgage lender losses on high Loan to Value mortgages from early 2014. It’s nothing new. When Building Societies ruled the roost many were constrained from lending at LTVs of more than, say, 80%. To get round this the Insurance Market came up with Mortgage Indemnity Guarantee or “MIG” policies. Often running to thousands of pounds the premium would be rolled up in the mortgage. With a booming market Insurers and Lenders made lots of money. Then came the housing crash of the nineties, Insurers burned badly and MIG policies became largely extinct. George Osborne would have just turned 20 at the time. The IMF says the FLS should be “strictly temporary” and that in return for access participating banks should pay a fee “commensurate with the risks posed to the public balance sheet”. Will the FLS boost the market or is it simply a fig leaf to hide how shrivelled it has really become? Perhaps all will be revealed in time for the next General Election!        
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