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Things aren’t looking great for the market

This month’s cover feature in Lending Zone is a debate, sponsored by HML, focussing on the state of the lending market. Round the table were the big beasts of the industry, including the likes of Lloyds Banking Group’s Mike Jones, the Council of Mortgage Lenders’ Paul Smee, the former chief executive of now defunct specialist lender edeus Michael Bolton and Home Funding’s Tony Ward, to name just a few.

The wide-ranging exchange takes in everything from the securitisation market and UK debt to the future of interest-only. And unfortunately the overall mood of the article is not positive, particularly with regard to interest-only.

The market has recently seen a wide range of lenders pull out en masse from offering interest-only at 75% LTV, with borrowers now having to stump up a 50% deposit to qualify for it.

Ward contends that there is a strong argument, with the exception of buy-to-let, to ban interest-only, and describes any lender offering 75% LTV interest-only as irresponsible.

Borrowers should be forced to switch to repayment now while they can still get on top of their mortgage costs. Interest-only will turn out to be as toxic as self-cert

Bolton argues that borrowers should be forced to switch to repayment from interest-only now, while they still have an opportunity to get back on top of their mortgage costs. “Interest-only will turn out to be as toxic as self-cert,” he says.

You can see both points of view – interest-only really works only in an environment where there is a massive boost in house prices that the borrower can take advantage of.

Elsewhere in Lending Zone, there’s more bad news, starting with Paul Hunt, managing director of Phoebus Software, on page 32 who gives his take on the Budget and damns it as a missed chance to aid stability.

And Eric Stocklet, chief executive officer of Crown Mortgage Management, argues that unless the economy receives some form of a fillip from a yet-to-be determined source, it will be hard to be optimistic about mortgage growth over the next few years. “Borrowers should be forced to switch to repayment now while they can still get on top of their mortgage costs. Interest-only will turn out to be as toxic as self-cert”

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  • Sibley 28th March 2012 at 8:38 am

    I took an Interest only mortgage on my home in Maidstone on a 90% LTV. I’m now in Negative Equity and can’t sell the House.