Why HomeBuy is a safe bet in a tough lending market 

Understandably nervous in the light of the American sub-prime experience and the difficulty of getting to grips with the financial truth of some securitised mortgage products, lenders are engaged in a ‘flight to quality’ at the moment, demanding higher deposits from buyers and pulling many mortgage products altogether.

But, as Marilyn DiCara, Moat’s director of sales and marketing, argues: “We must not throw the baby out with the bath water. There are still areas of the lending market which represent fantastic, low risk business for banks and building societies.”

A case in point is HomeBuy lending. A poor understanding of the HomeBuy market could end up characterising these purchasers as more marginal and therefore to be avoided. That would be completely wrong. There is nothing sub-prime about HomeBuy purchasers.

They are probably more thoroughly financially vetted than any other buyers in the housing market. Housing associations carry out very rigorous financial checks not only on incomes and credit histories, but on the buyer’s capacity to afford the level of mortgage they intend to take out to ensure they do not overstretch themselves.

There is comfort for lenders in other ways too. Because the purchase is shared between the home owner and the housing association, lending is never close to 100 percent of the open market value. Moat’s new MyChoiceHomeBuy product, in partnership with seven other housing associations, has a limit of 85 percent equity purchase and the vast majority of equity shares purchased by New Build HomeBuy owners are well below that figure.

The lease also contains a ‘failsafe’ for lenders in the shape of the mortgagee protection clause. Lenders get priority above the housing association in the unlikely event of someone defaulting on the mortgage. It is a virtual guarantee that they will get their money back, irrespective of market circumstances. And for all the reasons mentioned above, repossessions on HomeBuy properties are very low in any case.

Marilyn DiCara says: “Housing associations have a strong vested interest in making sure the buyers of their homes are good quality. What we are about is building stable and sustainable communities, with a range of tenures and incomes. It does no favours to local economies or to the reputation of a neighbourhood to see homes being repossessed, run down or sold off at auction. We want our HomeBuy purchasers to be points of aspiration for the local community, encouraging others to dream and work for their dream.”

In the last financial year, in increasingly tough market conditions, Moat supported nearly 800 more households into affordable home ownership –  more than two families every single day of the year. We, and a number of others like us, are specialists. We have been through difficult market conditions before and thrived, alongside our buyers. We know what we are doing in marketing.

In a climate of financial fear, lending to HomeBuy purchasers is not the brave option. It is the low risk, canny option for banks and building societies.

For more information contact Marilyn DiCara on 0845 359 6372 or email marilyn.dicara@moat.co.uk