Indemnities to help builders and buyers see the wood for the trees

HOUSEbuilder Stewart Milne edged back into profit last year but has called on the Chancellor to kickstart the industry by putting pressure on banks to lend more and underwrite mortgages.

Stewart Milne, chairman and chief executive, said that, although the housing market has stabilised, he expected little uplift unless Chancellor George Osborne directly addressed the shortage of lending.

"We expect to see existing conditions prevail over the next 12 to 18 months unless we start to see some positive actions being taken by the government," he said after announcing a 100,000 pre-tax profit compared to a loss of 27 million in 2009.

He called for "greater clarification and consistency in the criteria being used to screen mortgage applications".

"Number one has got to be putting greater pressure on banks and building societies to make more mortgages available," said Milne. "There is an onus on the banks and building societies to start developing a wider range of products than they had before, in part to meet the needs of the first-time buyer.

"Mortgage indemnity is an area (where] we feel the government should play a serious part."

He said he "remained hopeful" that Osborne will announce some support measures for the house building industry on Wednesday.

Glenn Allison, the group's managing director, said the small number of mortgage indemnity guarantee (MIG) schemes currently available were too small to make an impact.

He said: "It is restricted to small pots of money but it has proved and been used very well, but it needs to be done on a much broader base than it currently is."

Jonathan Fair, the chief executive of industry body Homes for Scotland, said a government-backed MIG scheme would encourage lenders to increase loan to value ratios, which would benefit first-time buyers but would also be available across the market.

"We would like both Westminster and the Scottish Government to work with industry to introduce a jointly funded mortgage indemnity guarantee scheme where government and builders would pay premiums and buy the insurance to underwrite risk for the banks."

Mortgage underwriting is set to become an issue in the Scottish elections after Scottish Labour leader Iain Gray said at the weekend the party would introduce a MIG scheme. The Scottish Government said builders that wished to introduce their own MIG scheme could apply to its 10m Innovation fund for support.A Scottish Government spokesman said: "We will work with the Council of Mortgage Lenders and Homes for Scotland to explore the extent to which the Scottish Government can support the development of mortgage indemnity schemes."

Turnover to June 2010 decreased to 251m against 276m in 2009, after a further 10 per cent decline in house sales to 550.