Housing: Mortgages

Lord Naseby Excerpts

Wednesday 10th November 2010 Lords Chamber

Asked By

[Lord Naseby]

To ask Her Majesty’s Government, in the light of the Financial Services Authority’s new affordability rules, what is their assessment of the current housing mortgage market in terms of the availability and price of mortgages.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Financial Services Authority is engaged in a review of mortgage regulation, the Mortgage Market Review. The Responsible Lending consultation paper published in July, which looked at proposals on assessing affordability, forms one part of this ongoing consultation. The Government will continue to work with the Financial Services Authority, mortgage lenders, intermediaries and consumer groups to ensure a mortgage market that is sustainable for all participants.

[Lord Naseby]

Is my noble friend aware that mortgage lending is at a 10-year low? The main reason seems to be that, on the one hand, the lenders—that is, the building societies and the banks—are saying that they require a 25 per cent deposit and that they have to waive certain supplementary income, while, on the other hand, the FSA is saying that it has not prescribed a 25 per cent deposit but is imposing tough new proposals. Will my noble friend bring together these two parties so that couples who want to buy a modest house of, say, up to £200,000 in value, but who cannot possibly find £50,000—which is the 25 per cent requirement—are asked to put forward a 10 to 15 per cent deposit?

[Lord Sassoon]

My Lords, the level of new gross lending in the mortgage market is above levels seen throughout the 1990s, but, inevitably in this part of the economic cycle, it is low, as my noble friend said. Although loan-to-value thresholds are taken into account by the FSA for prudential purposes, they are not hard limits. The FSA says in its recent consultation paper that no case has been made for LTV caps on consumer protection grounds, and the FSA is not proposing to impose a maximum LTV cap. I note from just scanning mortgage products available on the internet this morning that there is still a range—admittedly a reduced range—of products with 80 per cent and 90 per cent LTV available.