“Unless 100% mortgages come back, unless there is a full return to sub-prime, you’re not going to see a normal housing market. Real, quality sub-prime should come back to the market. Risk pricing must come back to the lending market,” said Wriglesworth.
“There is nothing wrong with a 100% mortgage – lenders should just price for risk. I do believe that if you are going to lend at high multiples you need to do it at five, six or seven-year fixed rates. I think that people selling short-term two-year discounted mortgage rates are mis-selling because you’re exposing people’s balance sheets to rising interest rates in two years’ time, even if it’s a fixed rate.
“Without a return to sensibility in terms of regulation, capital adequacy and the funding markets, we will not see a recovery in the housing market,” he added.
Speaking at the Mortgage Business Expo in Manchester, Wriglesworth told delegates while the market has remained stable amid eurozone fears, lenders need to “be braver” with their lending.
With lenders having to follow current capital adequacy rules including Basel III, the Financial Services Authority is “stifling the ability of lenders to lend anything to anyone who wants it,” and branded the regulators move as a “total overreaction.”
In the same session a delegate asked the panel whether lenders should price risk with interest-only mortgages to be more prudent instead of enforcing repayment vehicles.
Robert Sinclair, director the Association of Mortgage Intermediaries (AMI) (pictured) added: “There are interesting challenges around this. The issue sits with where lenders are on their prudential requirements of how they have to capital liquidity fund that interest on the asset versus a capital repayment asset.”
“If interest-only was as it used to be in the olden days, half or 1% more expensive, than we get to a better place both for the lender and the customer, but this is a challenge we have to get to.”
Wriglesworth agreed adding that the whole point is to bring back pricing in the mortgage market.
“What’s wrong with giving someone who’s more risk adverse a higher priced loan like in the olden days? Banks should price their loans for risk.”