Lord Myners says 100% mortgages were foolish

February 22, 2009 by Brendan

News

Lord Myners, the banking minister, has branded the decision to offer house buyers 100% mortgages as ‘foolish’. This came after Prime Minister Gordon Brown called lenders to be ‘prudent and careful’ in their lending offers.

Lord Myners added that the decision to offer 100% mortgages should never have been taken after the mistakes of recent years, particularly in the USA where he described lending decisions as:

Reckless, feckless, witless lending.

The FSA (Financial Services Authority) is now considering imposing controls on any lender that plans to offer a loan of over 100%.

According to the Tories, it was Gordon Brown’s own regulatory system that is responsible for 125% mortgage deals, and the Liberal Democrats said that calls from the PM to halt 100% mortgages was too little, too late.

Lord Myners, speaking on the ‘Politics Show’ on BBC One, stated that the banking community was widely agreed that 100% mortgage deals were a mistake. He added:

We need to create systems through enhanced governance, more accountability and appropriate regulatory intervention to ensure that excesses do not occur.

Gordon Brown wrote in the Observer about his plans for tighter controls on mortgage loans over 100% of the value of the property, and for loans that were offering 6 times the salary of the applicant. Mr Brown stated he wants to see caution replace reckless lending, which will produce more stability in the property market.

Gordon Brown added:

We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit.