100% LOAN SET TO BE SCRAPPED.Byline: By CLINTON MANNING PLANS to outlaw super-size mortgages are being considered as part of a massive clampdown clamp·down n. An imposing of restrictions or controls: "Advertisers and broadcasters would raise howls of protest against any strong clampdown" Wall Street Journal. on the banks. City watchdogs may ban 100 per cent loans and cap the amount people can borrow at 3.5 times their salary. The idea, outlined in yesterday's report on banking by Financial Services Authority The Financial Services Authority ("FSA") is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its main office is based in Canary Wharf, London, with another office in Edinburgh. chairman Lord Turner, would be designed to prevent the kind of reckless lending blamed for much of the current recession. The number of mortgages allowing people to borrow more than 100 per cent of a property's value almost doubled between 2005 and 2007, says the Turner report. The number of people borrowing more than 3.5 times their salary jumped from 20 per cent to 30 per cent in the same period. One of the most controversial was Northern Rock's Together loans which allowed 125 per cent mortgages. Earlier this month Rock bosses admitted that while these loans accounted for 30 per cent of its mortgages, 50 per cent of those in arrears Adv. 1. in arrears - in debt; "he fell behind with his mortgage payments"; "a month behind in the rent"; "a company that has been run behindhand for years"; "in arrears with their utility bills" behindhand, behind and 70 per cent of people it had repossessed had them. The FSA FSA Financial Services Authority FSA Food Standards Agency (UK) FSA Farm Service Agency (USDA) FSA Financial Services Agency (Japan) says such mega-loans helped fuel the property boom and raised the risk of the subsequent slump. The FSA faced a backlash yesterday from critics claiming moves to restrict lending would shatter many young people's dreams of owning a home. Insisting on minimum 15 per cent deposits - pounds 24,000 for the average property - would exclude many. Others might be tempted to top up deposits with more expensive loans or credit card borrowing. Trevor Kent Trevor Kent (born 24 April, 1940 in Queensland; died 4 November, 1989 in Melbourne) was an Australian theatre and television actor who achieved a level of public recognition in the 1980s. , a former president of the National Association of Estate Agents said: "Any move to further restrict mortgage lending would just add insult to injury. "It would cause property prices to come down yet further. "Lenders are already reluctant to lend and this would give them an excuse to put up another hurdle stopping buyers getting access to finance." The Turner report also proposes forcing banks to save more cash in case of a downturn, and curbs on bankers' bonuses to discourage excessive risk taking. The report also urges the industry to look for ways to do more to protect savers if a bank fails. CAPTION(S): REPORT Lord Turner |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion