Name: Bob Young
Company: CHL Mortgages

The problem here is twofold. It is about the relationship between the cost of funds (the blended average at which lenders ‘buy’ money) and a legacy from the past few years when unrealistically low rates were routinely offered as lenders rushed for growth.

The actual cost of funds is still very high – we must ignore to a certain extent LIBOR and Bank base rate – with the high-street lenders raising capital from depositors (retail funding) and the capital markets. With the cost of funding being so high, this in turn is reflected in the cost of a mortgage.

While this might have been pointed out by many industry experts, the message does not make a good headline, whereas state-funded banks charging higher than average rates on their products over the last year does.

Importantly, we all must realise that the days of cheap loans are now over. Most mortgages issued between 2003 and 2007 were effectively underpriced as lenders sought to increase market share with ever more ridiculous pricing models based on assumptions that a 10-year old could have seen as unrealistic.

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Banks have to make a profit, the balance sheets need to be repaired and frankly, as a taxpayer, I do not want to give any more money to any financial institution because it seems that they were too stupid to run their business properly.

In other words, I want them to do me a favour and increase their value so that the loans can be repaid and my tax money can be put to better use.

Name: Melanie Bien
Company: Savills Private Finance 

The state-funded banks desperately need to repair their balance sheets but are also under pressure to offer competitive mortgage rates and higher LTVs in exchange for being bailed out by the taxpayer.

Keeping their shareholders, the Government, taxpayers and customers all happy at the same time is an unenviable task and is proving to be a difficult one. The Government must be clear about what it wants. Is the main goal to repay the taxpayer as soon as possible?

If so, this may be best achieved by leaving the banks to run themselves, enabling them to pay the bonuses they need to attract the best talent in the business, who will generate the highest profits.

But this approach would enrage public opinion, which is particularly important with a General Election around the corner.

What about their responsibility to the customer? After all, many of those taxpayers are likely to be customers too.

As the number of mortgage products has plummeted so spectacularly, surely the government-funded banks should step into the breach and lend to those requiring higher LTVs of around 90%?

The answer is that the bailed out banks must do both. They have a responsibility to lend at higher LTVs and to offer competitive products, although not too competitive, as this will enrage lenders who were not bailed out.

But ultimately they must repay the taxpayer. There is nothing wrong with this, but the repayment schedule must be agreed over a reasonable period of time.

Name: Paul Hunt
Company: Phoebus Software

These banks are in an impossible situation. Paying back the loans they have received in a timely fashion while still offering lower than average rates as a gesture of goodwill is not realistic.

It was risky lending practices that got them into trouble in the first place and they are in no hurry to be flippant with the bail out cash which they have received and fall back into old habits.

These banks need to be conservative and are doing nothing wrong by shoring up their balance sheets. They have chosen to prioritise – quite rightly – paying back the huge sums of taxpayer money they have had to borrow. But as things stand, there is very little chance these funds will be recouped by 2012, and it will be a push for them to be repaid by 2014.

In fact, the only way these lenders have any chance of paying back these loans and being released from Government control is by getting their houses in order and making their businesses profitable again. Lower rates will not help them do this.

As these lenders have received taxpayer help, they will always be on the receiving end of negative press.

If they want to end the negativity, they need to remain stoic and pay back their loans as quickly as possible.

Offering low rates from a business with a weak balance sheet might get a few positive headlines, but it would just be papering over the cracks.

In the case of the state-backed banks, it would be the equivalent of papering over the Grand Canyon.