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Mortgage lenders could get more difficult

Monday 9th November 2009

A review of the mortgage market could shock property lenders back into their shells and dampen lender willingness to offer loans, said the boss of a financial company.

Andy Cuthbert, managing director of dot financial services, said: “It is possible that lenders could be forced to retract into their shell as if the recommendations come into force, lenders will themselves become the main point of accountability regarding affordability. Previously, this has been a responsibility that they have abdicated to the intermediary, who still provide the majority of mortgages for most lenders.”

Government pressure on lenders to keep offering credit to the property market must continue, he said, because lenders are still hugely in debt to UK taxpayers.

Cuthbert said instead, lenders have been using the extra funding support to rebuild damaged balance sheets rather than use available capital to lend. “If lenders do further constrict lending this will not be good news for anyone other than the very best of borrowers,” he said.

Although, he said property prices remain good value as interest rates remain at record levels.

“As rates are expected to increase at some point from the half year onwards in 2010 this could lead to a huge number of borrowers looking to remortgage as they panic following a lengthy period where they have benefited from reduced rates,” he said.