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Capital Relief is Essential to Get Sorted

Written By On 31/07/2013

According to the Prudential Regulation Authority it has not been easy enough for lenders that had joined up to the NewBuy Guarantee scheme to claim capital relief. The system was set up sixteen months ago and apparently now the PRA, together with the Treasury, are looking at ways to rectify this particular issue with the Help to Buy scheme that was started up April earlier in the year.

Since the Help to Buy Mortgage Indemnity Guarantee scheme commenced there has been increased activity in the property market leading to more optimism than in recent times. As was the aim by George Osborne, more individuals and small to medium businesses are getting loans accepted easier and faster. The chancellor is set to release the next step in January next year and has continued the process of putting plans into operation. One of the key points he will address is simpler ways for lenders to claim capital relief.

The question is however, why potential financial institutions would bother signing up to grant loans if they are not able to receive back the relief that they should be entitled. Therefore it is paramount that the problem gets resolved as soon as possible.

Lenders participating in the NewBuy scheme have needed to meet certain minimum criteria in order to qualify for relief. These measures include using an internal credit score system so as to minimise foreseeable financial problems. Barclays Banks are able to reach the requirements, but unfortunately others do not find these demands as easy.

The PRA said that the structured finance process that exists for the NewBuy scheme makes it very hard to claim the relief. The representative added some points

In terms of the new scheme they are looking at is where would the actual capital relief come off, where would you put it and where would it sit. That will depend on where the Help to Buy scheme ends up being.