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No time for tough measures

At the beginning of last week it looked like 100% LTV mortgages and flexible income multiples could be a thing of the past.

In the run-up to the report on the financial crisis by the Financial Services Authority’s chairman Lord Adair Turner, the headlines were full of warnings that what had been decried as irresponsible lending practices would be canned.
What we actually got, though, was a well thought out report that looked at how financial markets got in the current mess that we’re currently all enjoying and how it could be stopped from happening in the future.

Turner avoided knee-jerk reactions that would chime with popular sentiment. But was it really a get-out-of-jail card for flexible lending in the UK or just a stay of execution?

Turner had a long list of reasons why capping LTVs and loan to incomes might be a good idea. But you couldn’t help but notice the list of reasons against capping mortgage credit was considerably shorter.

The two small points were that it would stop people from getting on the housing ladder and could encourage borrowers to use unsecured credit to make up any deposit shortfalls.

While Turner went on to say it was premature to come to any specific conclusion on the matter, his thinking seems to be going down one track at the moment.

To place such a draconian measure as capping LTVs and LTIs could be a serious impediment to the UK mortgage market as it struggles to get back on its feet.

Whatever tinkering Turner does under the bonnet of the UK mortgage market, he needs to ensure he gets the engine of finance running smoothly again and not put barriers in its way.


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