UK gives banks capital relief under home loan scheme

LONDON Tue Oct 8, 2013 2:50am EDT

LONDON Oct 8 (Reuters) - Banks taking part in Britain's new scheme to encourage home-buying won't have to set aside capital to cover the state-backed portion of mortgages they offer as part of the programme, the Bank of England said.

Under the government's Help to Buy scheme, which launches on Tuesday, home-buyers may deposit as little as 5 percent to buy a home and the government will guarantee up to 15 percent of the loan.

"The guaranteed portion of the loan would be treated as an exposure to the UK government," the BoE's Prudential Regulation Authority said in a statement.

Banks would only have to set aside capital on the non-government backed portion of a mortgage, the PRA added.

So far, RBS and Lloyds and some smaller lenders have said they will participate in the scheme and other big banks were waiting for more details, chief among them how the capital relief will work.

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