Reinsurance broker Gallagher Re is in talks with 20 reinsurers over securing additional backing for a new UK mortgage indemnity scheme which is working to address the social challenges around home ownership faced by first-time buyers.

Gallagher Re mortgage

The Deposit Unlock scheme, developed and administered by the reinsurance broker, has been created as a long-term solution to the Help to Buy equity loan scheme, which is due to end in 18 months.

In June, Newcastle Building Society became the first regional lender to launch a product range under the scheme, which enables people to buy a home from participating homebuilders with just a 5 percent deposit. 

In the past week Nationwide, the UK’s largest building society, has become the first major national lender to sign up to the scheme.

The scheme is also backed by 17 Home Builders Federation members – responsible for more than 60 percent of new UK house production.

Housebuilders effectively fund the indemnities in the reinsurance-backed scheme through a small percentage paid through every new build sold, reducing the risk to lenders. 

Steve Rance, managing partner of mortgage indemnity reinsurance at Gallagher Re, told The ESG Insurer the scheme was an example of (re)insurance serving as the “enabler for social good”. 

Having secured reinsurance capacity for the first 11,000 homes built through the scheme, Rance revealed the reinsurance broker is now working with 20 reinsurers to further expand the scheme as more lenders come on board.

“We have a situation where a lot of young people are paying more in rent each month than they would if they could buy their own home, but saving a 10 percent deposit is out of reach,” Rance explained.

“Deposit Unlock demonstrates cross-industry collaboration at its best, with housebuilders, lenders and the insurance industry coming together for the common good”

Steve Rance, managing partner of mortgage indemnity reinsurance at Gallagher Re

He said the Deposit Unlock scheme could unlock the return of 95 percent mortgages in the new-build space “at no cost to taxpayers and at significantly reduced risk to lenders”. 

“The platform is entirely scalable – it is intended to support hundreds of homebuilders and multiple lenders. I hope it encourages homebuilders to build for the long term.”

He said securing reinsurance capacity to support the scheme was one of the less challenging hurdles to overcome in getting the scheme up and running, with a reinsurer bought on board early for the initial 11,000 properties and conversations now ongoing with 20 other reinsurers around providing support for the scheme.

“The UK is the largest mortgage market in Europe and is naturally attractive to US, Bermudian and European reinsurers,” he said.

Rance said it was Gallagher Re’s job, as the scheme’s administrator, to create the necessary datasets to give reinsurers the level of confidence to take on these exposures.

“The UK is the largest mortgage market in Europe and is naturally attractive to US, Bermudian and European reinsurers”

Steve Rance, managing partner of mortgage indemnity reinsurance at Gallagher Re

With the Gallagher Re team having been in discussions with more than 25 lenders over the past 12 months, it is expected that at least two to three more lenders will launch 95 percent loan to value product offerings before the end of the year.

“(Re)insurance has been the enabler in this,” Rance said. “Deposit Unlock demonstrates cross-industry collaboration at its best, with housebuilders, lenders and the insurance industry coming together for the common good.”

Tom Wakefield, CEO designate at Gallagher Re, said Rance and his team have “helped create – as well as raised and placed the reinsurance capacity to sustain – a highly collaborative and commercial solution that meets the needs of housebuilders, lenders and low-deposit home buyers alike”.

“This project underlines the key role that insurance can play in addressing important social challenges and enabling change.”