There is no "magic bullet" that will remove the problems faced by first-time house buyers, Michael Coogan, director-general of the Council of Mortgage Lenders, warned yesterday. He told the First-Time Buyers summit called by the Housing minister, Grant Shapps, that mortgage insurance, shared ownership and product innovation could all potentially help, but that returning to a normal mortgage market was likely to be a gradual process, as confidence was restored.
The Government estimates that there are 1.4 million households who currently are unable to buy because of house prices and the lack of mortgage availability. Mr Shapps called the summit with industry representatives to have a "frank and open discussion" to consider ways first-time buyers could be helped.
But Mr Coogan pointed out that lending to people with only small deposits is very capital-intensive for banks, with lenders typically needing to hold six to eight times more capital for a loan of 90 per cent of a property's value than for one of 60 per cent. He added that consumer demand was also relatively low, not just because of the higher cost of such mortgages, but also because of uncertainty over the future direction of house prices.