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Learn to live with the lending squeeze

More developments in the regulatory jigsaw have emerged in the past few weeks.

These include pronouncements on banking from the coalition government and a directive on mortgages from the European parliament.

There are tensions in the money markets, especially about the euro, pressure for higher capital requirements and European Union demands for large banks to shrink to meet competition standards.

The supply of finance is going to get tighter. Reports from diverse sources including the Royal Institution of Chartered Surveyors, the Joseph Rowntree Foundation, Shelter, the Home Builders Federation and the Council of Mortgage Lenders, have highlighted the squeeze on home ownership.

The number of home owners is declining alongside frustrated consumer demand, mainly due to a lack of mortgages. Lenders are caught between a rock and a hard place – limited funds to lend and unmet demand to borrow.

Logically, this should produce new entrants to the market but even that process has been diminished by tighter entry rules.

It is not where lenders want to be but the market has to learn to work with tighter requirements and higher costs. It means more planning and focus on relationships between brokers and lenders, and customers and their funders.

Hopefully, the Bank of England’s new funding for lending scheme will show the way forward.

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