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Capping LTVs surely won’t have the desired affect?

I was intrigued by the rumours last week that the Financial Services Authority could limit LTVs.

If the FSA did make such a move, then it would be a typical case of closing the stable door after the horse has bolted.

Over the last few years many people took mortgages at 5% or 6% fixed rates. When they come out of these fixed rates they will be on SVR, which is far lower than they were able to pay before. Those on trackers are already hugely better off. So where is the consumer detriment they are supposed to be trying to protect?

By all means cap LTV at 100%. But if 3 x income is sensible at a 10% or 12% mortgage rate, then 4 x or 5 x income is commensurate with a 5% or 6% interest rate and no one seriously expects rates to go above this level for the next 10 years.

Anyway, given the current climate, who is seriously going to try to borrow silly amounts of money in the first place?

Simon Webster

MD

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