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PM’s mortgage pledge is not prudent, say lenders
Nicholas Cecil, Chief Political Correspondent13 Oct 2008
MORTGAGE chiefs today branded a key plank of the Government's bank rescue plan “undesirable” and unlikely to happen.
Within hours of Gordon Brown giving details of the blueprint to avoid a financial meltdown, the Council of Mortgage Lenders questioned a “commitment” for major banks to return to last year's level of loan availability.
In a speech to a City audience in London, the Prime Minister said: “Most importantly, as a result of today's announcement, there is an undertaking to restore immediately and maintain to at least last year's levels the availability of loans for homebuyers and small businesses at competitive interest rates.” However, the CML quickly warned that this might not be “prudent or desirable”.
While seeking clarification from the Treasury, the lenders said they assumed the commitment was to a “more generic aspiration to achieving a broad, deep mortgage market in general with a good spread of products”.
CML director general Michael Coogan said: “Lenders have been working hard to continue to deliver a flow of competitive mortgages into the market, as well as to ensure that as many people as possible are able to keep their homes if they suffer temporary financial difficulties. These efforts will continue, and we look forward to working closely with Government to help deliver these objectives.”
Liberal Democrat Treasury spokesman Vince Cable added: “We certainly don't want to see a return to the boom and bust cycle of reckless lending feeding unsustainable house prices.”
Treasury officials said the Government was not
proposing going back to the overall level of lending for last year. Instead, the Royal Bank of Scotland, HBOS and Lloyds TSB, which are benefiting from a £37 billion injection of taxpayers' cash, were committed to “maintaining, over the next three years, the availability and active marketing of competitively-priced lending to homeowners and to small businesses at 2007 levels.” This aimed to ensure that people and small firms could get loans from these institutions while other building societies and banks cut back on their lending.
The announcement appeared to have sparked confusion in the City and in Whitehall. The commitment is not mandatory, raising doubts over whether the three part-nationalised banks would have to stick to it. There is also no guarantee of specific mortgage rates — which would depend on base rates, risk assessments, type of loan and other competitive lending.
Gross mortgage lending was £73.1 billion by HBOS last year; £29.4 billion by Lloyds TSB and £22.6 billion by RBS.
