View more on these topics

Ban on 100% loans signals ”first shot” on government intervention

Prime Minister Gordon Brown’s call to ban mortgages of over 100% LTV could mark the start of a slippery slope on government intervention in the mortgage market, industry insiders have warned.

Peter Williams, executive director of the Intermediary Mortgage Lenders Association, says: “This is the beginning of a process of control and regulation over the mortgage industry and a more precise product form than we have seen.”

Williams says Brown’s instruction to the Financial Services Authority to control 100% plus mortgages, revealed in The Observer newspaper yesterday, is “the first shot” in increasing government regulation of the mortgage market.

He adds: “The reality is that borrowers need 100% loans. The government needs to give more thought to how 100% mortgages can be granted safely, rather than banning them altogether.”

He also argues that there will always be a demand for 100% LTVs.

This means that if there is a ban buyers will simply find other ways of borrowing, such as credit card loans, as a means of securing a mortgage.

The Council of Mortgage Lenders shares these concerns.

A spokeswoman for the trade body says that home owners may look to top up their mortgage with unsecured debt if a ban on 100% plus loans come into force.

She says: “Everyone understands the appetite to move away from 100% mortgages in the mainstream market.

“Having said that, there are always other issues to consider. One obvious one is on shared equity mortgages, and I don’t think the government would want lenders to stop doing those.”

She says that Brown’s proposals are “superficially attractive” but adds: “It is something needs thinking through in a logical and coherent way.”


L&G offers mortgage related protection framework

Legal & General is deploying a new sales analysis framework, intended to help advisers identify where they need to focus to increase their effectiveness when selling protection.

Blame Brown, don’t bash the bankers

While I won’t claim to have watched the full three hours and 15 minutes of last week’s Kangaroo Court – sorry, I mean the Treasury Select Committee’s grilling of the naughty bankers from HBOS and Royal Bank of Scotland – I watched enough to get annoyed.

Lloyds TSB and BoS lose their AAA rating

Moody’s Investors Services has downgraded the credit ratings for Lloyds TSB and Bank of Scotland from AAA to AA3 as a result of HBOS’ high exposure to risk.


News and expert analysis straight to your inbox

Sign up