What the papers say – 17th – 18th March 2012

The Government NewBuy scheme was the talk of the financial press this weekend, and reaction was definitely mixed. Under NewBuy, the taxpayer and housebuilders provide security for new build properties worth up to £500k, which acts as an indemnity for the mortgage lender in case of future repossession. Borrowers require a deposit of as little as 5%, and experts suggested that rates are reasonably competitive in comparison with standard deals. It was also felt that the scheme had been sensibly targeted to focus on affordability rather than size of deposit.  Critics in the Telegraph and Mail on Sunday expressed fears however that a further drop in house prices could lead to many homeowners falling into negative equity, although the Financial Times pointed out that there is a risk with all high loan-to-value borrowing, not just NewBuy. The FSA warned this week that an estimated £120bn of interest-only mortgages are due for repayment over the next 10 years, but up to 80% of these loans do not have a plan that is still on track to repay the debt in full. The Sunday Times and Express both highlighted concern for older borrowers, the group likely to be most affected by this. With increasing rates, and lenders reluctant to lend to people in retirement, remortgaging may not be an option, so experts advised homeowners to seek advice on a repayment strategy as early as possible to avoid having to sell their property. In protection news, the Sunday Telegraph reported that new European legislation on unisex insurance rates, coupled with changes to tax rules later this year, could push up the cost of protection by as much as 30%, and urged consumers to look into their current arrangements now. On a positive note the Mail on Sunday revealed that payouts on Critical Illness policies are on the increase, with companies such as Aviva and Scottish Provident reporting payouts on over 90% of claims in 2011.

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