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Government must take a controlled approach to lending

In the old days, insurance companies underwrote the loan that exceeded the basic lending limit – usually 75% LTV – and fees were on a sliding scale according to risk.

Lenders whose strategy and policy had become somewhat loose have now gone to the opposite extreme and there are now no decent products for anything less than 75% LTV.

Rather than backing schemes that have a limited scope for getting the market moving and only target first-time buyers, if the government jointly underwrote some of the risk with the insurance industry, this may restore lenders’ confidence in re-entering the lending market.

Recession picks up its own momentum from a stagnant and declining housing market, (as many of us recall from the late 80s and early 90s), however we were not then plagued by the poisoned chalice of toxic debts and poor lending decisions.

I would suggest a controlled return to lending, with a focus on sensibly priced longer-term fixed rates, with products priced for five years or more at about 5% to 6%, with perhaps an amnesty on early repayment charges in the case of redundancy or relationship breakdown, which would have to be proven. Cases would all be full status. This may lead to the return of 90% to 95% cases.

Michael Lockyer

The Online Partnership

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