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Written by rosalind renshaw

NAEA boss Peter Bolton King and Prime Minister David Cameron have both waded into the row about plans to clamp down even further on mortgages in the name of responsible lending.

The Mortgage Market Review, by the Financial Services Authority, has been called draconian in some quarters. It would toughen  lenders' already risk-adverse approach, for example by making lenders take responsibility for borrowers' ability to afford paying their mortgages in the future.

Housing minister Grant Shapps, due to meet the FSA this week, has said that under the proposals, he himself would have failed to get a mortgage.

This week, Cameron said that lenders had already gone too far in preventing 'good risk'  buyers from getting mortgages.

The Prime Minister warned that the housing market was 'stuck' and would not improve until banks and building societies got back to 'respectable' lending. Cameron said the reaction to the crash had now gone too far.

He said: “The pendulum has now swung too far the other way. If you are a single person, you are earning a decent salary, you go to the bank or building society, you are actually quite a good risk, they won’t give you 80% of the value, they won’t give you four times your salary.

“So we are working with them to try and say, of course we don’t want to see the unsustainable boom of the past, but we’ve got to get proper lending, respectable lending, going again.”

Cameron made it clear that he did not want to see a return to 120% mortgages and loans based on seven or eight times earnings. But he said: “We don’t want another housing boom where prices rise out of people’s reach, but the housing market is a key part of the economy. You need a housing market where people are able to sell and people are able to buy.”

In his hard-hitting comments, Bolton King said: “It is crucial that the FSA’s review of the housing market is not allowed to dash the dream of hundreds of thousands of people to own their own home.

“If the current proposed restrictions are applied, more than 150,000 house purchases each year will not take place. Lower income families and young first-time buyers will bear the brunt of this.

“The knock-on effects will be to put more pressure on both the private and social rented sectors and to decrease the supply of new homes at a time when the UK is already suffering a housing shortage.

“Responsible lending must be made available to responsible people.”

Meanwhile, the Bank of England’s credit conditions survey is expecting mortgage demand – which dipped in the last three months of 2010 – to fall further in the first quarter of this year.

Comments

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    • 10 January 2011 05:45 AM
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    PASS IT ON YOU BANKERS!

    • 08 January 2011 07:20 AM
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    OK guys, 4 x salary which based on the average in the UK is £100K, what good is that ? I don't think most people are even on the average these days, do you get paid that much working in Asda, M&S or any other retailer, I think not. What deposit are buyers supposed to have, another £60K or so in the back of the cupboard perhaps another £10K down the back of the sofa ? The lowest average price is still over £160K, it's not rocket science is it guys, it's not the availability of mortgages it's the cost of the houses...

    • 07 January 2011 15:25 PM
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    Steve Anderson.
    My sentiments entirely.
    These 'moneylenders' are conning the 'government' all which ways up!

    • 07 January 2011 15:09 PM
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    "Call me Dave" hasn't a clue what to do , given that BOE is lending to these institution's at .5% the margins they are making at our expense is just out outrageous. It simply is disgusting and irresponsible that they are not using the institution's which we own or have controlling interest in to ensure fair and responsible lending to the house market . They seem incapable of realising that allowing the current situation to develop will push property valuations over the edge and we will witness dramatic and rapid falls in values. Given that the majority of these banks are holding large property portfolio's which are heavily over valued , it all looks to me to be storing up an impending disaster.They simply don't understand risk , where is the risk in supporting a market by lending 80% of valuation at 4 times salary , not mention the VERY REAL positive impact on millions of jobs when compared to lending over £7 billion to the Irish who have a population of just 3million and have borrowed a further 20 billion from the EU......

    • 07 January 2011 13:08 PM
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    With house prices likely to be added to CPI with in the next six months ,and the existing problem with rising inflation the last thing Davey boy want`s is rising house price`s and as for forcing the banks to lend i think its a case of you can take the horse to water...........................

    • 07 January 2011 12:00 PM
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    Unfortunately the point that everyone appears to be missing in the simplistic approach, is that our banks have to work to internationally agreed criteria. It's those people across the channel again, don't you know. Their economies, unlike ours, are not heavily dependent on home ownership or let's be honest bouts of house price inflation, so getting their banks back to a situtation on which they have sound reserves is not as painful for them as it is for us. David Cameron knows this but there is nothing he can do about it unfortunately. We might be wiser to base our plans on the reality of the circumstances and strap ourselves in for a very tough year so far as the housing market is concerned in particular.

    • 07 January 2011 11:06 AM
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    If you raise the bar to high for house buyers then you will push house prices down causing a knock on effect leaving many people in negative equity, which will increase the risk to lenders, how about finding a happy medium where responsible buyers can acquire a mortgage. Lenders are cherry picking at present and need to be more reasonable or things will only get worse.

    • 07 January 2011 09:57 AM
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    Short and sweet. Completely agree Trevor!
    If you own a lending institution then surely you don't need to shout about what needs to be done, you just get on and do it! Others will then follow...

    • 07 January 2011 09:34 AM
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    Couldn't agree more Trevor, Northan Rock should set the example. If the others dont want to play ball then allow the (currently) public owned banks to fill their mortgage books.

    • 07 January 2011 09:18 AM
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    Are we not also forgetting that the Con/Libs also have control over two of the UKs largest financial institutions and if Mr Cameron really wanted those large organisations could be used as vehicle to provide reponsible lending. Its a bit like being a drink driver, peaching to other drink drivers how they should drive and enroute popping into the pub for another pint. The government has main say in prime lending outlets - practice what you preach Mr C

    • 07 January 2011 08:12 AM
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    But Mr Camerons housing misister is favouring downward prices and pushing all effort into social housing. As such if generally (but not all areas) prices remain slack or drop further then lenders won't lend. Mr Cameron manage your house and encourage FTB's through stamp duty incentives, buyer schemes etc. So many chains are tied from happening. If chains were backed to reach completion/s then so much money could be taken back by the lenders and part reallocated to new borrowers. Stopping people from selling is pushing peoples finances to the limits in bank charges that achieves nothing. Also come a few months time lending may further tighten as banks have to start repaying the bail out funds back to government (that tax payers provided). We are in an unreal market where a FS price can drop, yet its rental value increases. The housing minister and Cameron must understand that most of the private sector pays for the rental social units as landlords.

    • 07 January 2011 07:10 AM
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