§ Mr. Brooksasked the Minister of Housing and Local Government whether he is now able to make a statement about the date of operation of the 100 per cent. mortgage guarantee scheme.
§ Mr. Greenwood:The scheme will be brought into operation from 1st April, 1968 under arrangements made with the co-operation of the Building Societies Association and the British Insurance Association.
The scheme will help intending owner-occupiers with modest incomes who cannot find the deposit for a house, although they could afford the repayments on a mortgage (for example, young married couples).
They will be enabled to borrow up to 100 per cent. of the valuation or purchase price, whichever is the lower, of the house of their choice, provided they are taking out a mortgage under the Government's option mortgage scheme, and the valuation or purchase price is not more than £5,000.
Building societies will not normally lend more than about 80 per cent. of their valuation of a house without collateral security, which often takes the form of an insurance guarantee. The option mortgage guarantee scheme is of this form, but with the Government sharing the risk with the insurance companies. As a result the cost to the borrower of this insurance, which can be added to the loan itself, will be considerably reduced.
Under this scheme the building society will be prepared to lend up to 25 per cent. of their valuation of the house over and above the amount they would normally have advanced. If the normal advance would have been 75 per cent., a total loan of 100 per cent. will be available. The borrower must of course be able to meet the repayments on this larger loan.