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More harm than good

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  • 31/01/2003
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With mortgage lending breaking all records in 2002 (totalling £219bn for the year, according to the ...

With mortgage lending breaking all records in 2002 (totalling £219bn for the year, according to the Council of Mortgage Lenders) it seems this runaway success of the UK economy has finally piqued the interest of MPs and the Government.

A good example is right to buy. Last year measures to curb the maximum discounts available to council tenants were mooted in the House to little interest. However, an increase in stories about ex-tenants making huge profits from right to buy, coupled with high-profile house price increases, have prompted the Government to act decisively and reduce the maximum discount available to £16,000 in certain areas. The Deputy Prime Minister has even gone so far as to restrict the re-sale of ex-right-to-buy properties in rural areas.

Curbing right to buy is not enough in itself to suggest a flood of interest, but the announcement that Stamp Duty review meetings have been cancelled would suggest a new-found fascination among our elected representatives.

And now a cross-party group of MPs has urged the Government to make up its mind over the regulation of equity release mortgages, and include reversionary plans as well as mortgage-based equity release schemes under statutory regulation to avoid a potential mis-selling scandal.

While this new-found appetite for the industry is laudable, it appears some politicians have become emboldened by their media exposure and are pronouncing ways to curb excessive growth. One MP is so concerned about a return to boom and bust economics he has urged the Government to increase the capital adequacy requirements of lenders, or to lower the LTV ratios, thereby slowing down market activity.

Interest is one thing, but with repayments only taking up around 15% of a borrower’s income, and the last collapse still fresh in the minds of most lenders, comments like this will do more harm than good.


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