In a recent review, the government said it would look at new ways of ensuring people’s homes are protected if they cannot pay the mortgage due to accident, illness or unemployment.
Lenders can manage the risks associated with lending at high loan-to-values in a number of ways. These include taking out mortgage insurance. In the UK, there is a market for mortgage insurance provided by the private sector.
Some countries have adopted alternative models for mortgage insurance provision, such as Canada, where mortgage insurance is compulsory for all mortgages above a lower limit and below a maximum proportion of a home’s value. It is sometimes argued that this model helps provide borrowers with continued access to mortgage finance, by encouraging risk sharing between insurers and lenders, and helping ensure that lenders do not take excessive risks when the economy is growing and do not withdraw from higher lending during periods of economic disruption.
Some have proposed that the Government considers the benefits of international models like Canada. The Government is interested in the lessons that may be learnt from the experiences of other countries.