UK agrees fees, capital relief for mortgage plan-source


MANCHESTER, England, Sept 30 (Reuters) - Britain has agreedthe capital relief and fee structure for its mortgage guaranteescheme which it plans to introduce in the week starting Oct. 7,a government source said on Monday.

"We expect the majority (of the) lenders will ultimatelyparticipate," the source, who spoke on condition of anonymity,said. "We expect other lenders to confirm in the weeks andmonths ahead - between now and January - that they will beparticipating - probably not all of them but the vast majority.

"House prices are basically flat in most of the country sothis is a broad recovery from an extremely low base," the sourcesaid.

Prime Minister David Cameron has brought forward the launchof the mortgage guarantee programme which is designed to helppeople who have been frozen out of the property market by thesoaring size of deposits that are now required.

But some economists have said the plan risks stoking ahousing bubble. The government has asked the Bank of England,via its Financial Policy Committee (FPC), to make annualassessments of the plan, starting next September.

Asked whether Britain would tweak the scheme if there weresigns of a bubble, the government source said:

"We have specifically said we are going to give the FPC arole every September in looking with us at how the scheme isworking and then advising us whether the key parameters need tobe changed - that is the fees and the price cap.

"So the fees are the fees the lenders pay us for theguarantee. If the FPC were to say you should raise the fees thatwould make mortgages more expensive and obviously have adampening effect. If they specifically thought there was aproblem in London and the southeast they could recommend wereduce the price cap from 600,000 (pounds)."

Help to Buy was originally launched to help buyers of newproperties and the second phase, originally due to start inJanuary, was designed to assist buyers who might otherwise beunable to afford a down payment on a home.

Properties worth up to 600,000 pounds ($967,300)would beeligible for the second phase.

The government source denied any suggestion that theannouncement on the acceleration of the second phase had beenrushed to coincide with the Conservative Party's annualconference which is being held in Manchester, or in response toa proposal by the Labour party to freeze energy bills.

"We nailed down the fee structure and capital relief overthe last week - we have been planning to launch this schemeearlier for some time."

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