View more on these topics

Sub-prime won’t return to pre-crunch levels

LEADING trade bodies have given the clearest sign yet that sub-prime lending will never return to the high levels seen before the credit crunch.

The comments followed a statement by Mervyn King, governor of the Bank of England, in which he claimed the heady days of “wild lending” will not return.

King made the statement as the BoE launched its £50bn Special Liquidity Scheme to swap mortgage-backed securities for government bonds last week. Sue Anderson, head of member and external relations at the Council of Mortgage Lenders, says: “There’s been a severe contraction in the range of products on offer. The market is resilient but we are never going to see a return to the spread of deals that were available before.”

Patrik Carlsson, director of the British Bankers’ Association, says that although the BoE’s bailout will hopefully deliver much-needed liquidity to the banking sector, the key factor is risk. He says: “It is important to make the differentiation between risk and liquidity.

“In today’s climate it is inappropriate to be involved in 100% LTV mortgages. Banks are now more conscious of the impact of new business on their books.”

He adds: “They are being encouraged by the government and the BoE to rebuild their capital positions, so it is unlikely they will want to extend high LTVs to borrowers who are more hungry for capital.”

The Building Societies Association agrees there may be a move away from sub-prime but warns against giving up on the sector completely.

Neil Johnson, PR and policy manager at the BSA, says: “Sub-prime has helped consumers who otherwise may not have been able to get back onto the property ladder.

“Lenders are increasingly looking at risk but they need to realise that just because consumers have had black marks on their credit records in the past, it does not mean they cannot afford to get back on the housing ladder now.”

Last week King said that the Special Liquidity Scheme was not meant to facilitate another boom in the mortgage market.

Recommended

UBS may cut 8,000 jobs

UBS is expected to cut 8,000 jobs when it reveals its Q1 results on May 6.

TFC sees nearly 3,000 applications from Gravity

Since the launch of its online mortgage decision and case processing system, Gravity, TFC has received nearly 3000 mortgage applications. TFC Homeloans, part of the Orbiter Group of companies, was the first mortgage packager to fully adopt the Gravity system at the start of September 2007. Developed by software company Oppono, Gravity is now used […]

MS bids farewell to Alana Heaton

Mortgage Strategy display sales executive Alana Heaton is joining London-based mortgage firm Alexander Hall to train as a broker.

Life begins at…

By Fiona Holmes, proposition communications manager Having reached a certain age (it’s the new 40 by the way), I’m having to come to terms with the fact that my peers and I aren’t as immune from illness or death as we’d like to think. That’s the problem with 30 being the new 20 and 40 […]

Newsletter

News and expert analysis straight to your inbox

Sign up