James Moore: Borrowers to face a rocket from Migs?

Outlook Further evidence of unhappiness in the housing market yesterday as Nationwide reported a second consecutive monthly fall in prices. And there's little likelihood of any sustained improvement anytime soon. There simply aren't enough first-time buyers around for there to be a healthy market and the banks don't want to lend.

Part of the problem is that first-time buyers need mortgages at high loan to values, perhaps as much as 95 per cent. But these sort of loans are risky to offer, particularly with the jobs market being so uncertain. How, then, to square the circle? The industry feels it has the answer and the answer is Migs. Or Mortgage Indemnity Guarantees, for those who have forgotten their existence. That's an insurance policy you have to take out to cover the lender in the case of you defaulting, or, simply a "higher lending charge" on any loan above a certain loan to value.

The net effect of both is aimed at covering any gap between the amount of money advanced and the sale price of a repossessed house. Expensive, and irksome? Definitely, and they were more or less chased out of the market when credit was cheap and easily obtainable before the crunch.

The Mig, however, is sure to return at such time as the 95 per cent mortgage returns. And, banks being banks, it won't be long before they are imposed on 90 per cent loans, 80 per cent loans, even 75 per cent loans.