Wed, 16 Jun 10
Speculation is mounting that the government is to hand the Bank of England (BoE) greater powers to restrict the size of loans mortgage lenders can hand out.
It is being widely reported in the media that the Chancellor George Osborne is considering giving the BoE powers to impose loan-to-value restrictions on mortgages.
If implemented this could have a dramatic impact on the property market, leaving many potential homebuyers unable to secure a deal.
The Council of Mortgage Lenders says that the UK lending sector has already made strides to curb risky lending and this type of tough regulation may not be appropriate.
CML director general Michael Coogan said: “We need to remember that in the UK it was not risky lending that caused the banking problems, it was banks’ inability to refinance their borrowings due to the shutdown of global financial markets.
“We also need to remember that what is currently bothering most people about the mortgage market isn’t high-risk lending, but the fact that lending is so constrained into low-risk borrowers that it may be making it more difficult for the economy to grow as individuals and businesses find it more difficult than they would wish to borrow.”
“Policymakers need to be very careful to avoid trying to solve the wrong problems – the much bigger problem for the mortgage market for the foreseeable future will be in raising enough money to lend, not the risk of stoking asset bubbles through over-generous lending.”
He added that around a quarter of all mortgages are for more than 75 per cent of the value of the property.
By Joe Lepper
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