27
Feb
Government urged to reintroduce MIGs
The government has been urged to bring back a form of mortgage
indemnity guarantee (MIG) as a means of overcoming risk aversion
among lenders.
In a letter to chancellor of the exchequer Alistair Darling,
finance director of Team Association Phil Irving reminded the
chancellor that MIGs were a common feature of the mortgage
market.
He recalled that these were used by building societies to protect
themselves against risk in the days before the wave of
de-mutualisations and the 1990s recession.
Mr Irving noted that buyers had to purchase a MIG if they had
deposits of less than 25 per cent, which would enable lenders to
claim for any shortfall in mortgage debt in the event of a
default.
Reflecting on the current "aversion" shown by lenders towards risk,
he commented that the company and the agents it represents "are
firmly of the opinion that an updated version of the MIG system
could successfully tackle this very issue".
Yesterday Nationwide's chief economist, Fionnuala Earley, said an
injection of confidence in the housing market could "flow through
quickly" into an increase in sales.
