“To achieve this, the scheme will need to ensure that all lenders will be able to gain capital relief in recognition of the risk mitigation offered by the Government guarantee,” the CML said.
“Without capital relief, and depending on the size of the fee, the cost of the commercial fee that lenders will have to pay to gain the benefit of the scheme could make the scheme uneconomical.
“Because it will take some months to design and put the scheme in place, the benefits will not be immediate. However, a successful scheme could ultimately enable lenders to offer more low-deposit loans than they would otherwise be able to do without incurring concerns from funding markets, prudential regulators, or their own internal risk committees.”
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