Housing: Mortgages

Lord Oakeshott of Seagrove Bay Excerpts

Wednesday 10th November 2010 Lords Chamber

[Lord Sassoon]

My Lords, I certainly agree with the noble Lord that questions of affordability should be addressed, which is why the FSA is carrying out the consultation. The consultation is due to close shortly and forms an important part of the FSA’s ongoing work to ensure a sustainable mortgage market for the medium term.

[Lord Oakeshott of Seagrove Bay]

My Lords, I am sure that I misheard the Minister, but he seemed to imply that it was inevitable that mortgage lending is so low at this stage of the cycle. There is nothing inevitable about it. The fact is that the banks are not lending as they should and they are demanding 30 per cent and 40 per cent deposits from people with good prospects. What does the Minister think is a fair deposit for a bank to ask a creditworthy borrower to put down to get a fair and affordable interest rate? The banks are not doing it at the moment.

[Lord Sassoon]

My Lords, it is certainly not for government to make judgments about the right terms on which mortgages should be advanced by individual banks. There is a rebalancing going on from an excessive household leverage which built up in the past decade. There is also a necessity for the banks to price all their products, including mortgage products, at an appropriate margin, because it was quite clear that they were extending a whole range of credit products, including mortgages, at submarket rates before the crisis. The Government’s interest is to make sure that we have a sustainable balance, which means that people, including first-time buyers, can get mortgages on appropriate terms, but also that it is sustainable and does not lead to another bubble. We are following very keenly the work of the FSA in this regard.