Housing Reform

Nigel Adams Excerpts

Monday 21st November 2011 Commons Chamber

[Grant Shapps]

As with the general affordable rent programme, what will typically happen is that people will be brought out of the private rented sector and into the affordable rent sector. Rather than paying 100% rent, people will be paying affordable rent, which in London, for example, is just 65%. That does indeed keep the pressure on housing benefit down.

[Nigel Adams (Selby and Ainsty) (Con)]

Will the Minister explain at exactly what stage the taxpayer will become liable under the mortgage indemnity scheme should there be a default on a mortgage?

[Grant Shapps]

Yes, I certainly can tell the House a little more about the mortgage indemnity scheme. It has principally been worked up by the Council of Mortgage Lenders and the Home Builders Federation. They had hoped to produce it on their own, without Government backing, but that was not possible.

First, the home buyer will put down a deposit of at least 5%. That is the first chunk. Secondly, the home builder will put money into an indemnity fund. It will stay there for seven years, and they will not be able to touch it. They will get it back after that period. Only after those two mechanisms have failed will the Government step in to back the mortgage. Lenders will pay a fee to be part of the scheme as well, so overall we believe it will be excellent value for money for the taxpayer.