Watchdog warns Rachel Reeves looser lending for first time buyers could mean home repossessions double
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Chief Executive Nikhil Rathi told MPs that any move to make borrowing easier for first time buyers could lead to the rise of people ultimately losing their homes. The Financial Conduct Authority has warned that a push to ease restrictions on mortgage lending could see the number of home repossessions double.
Watchdog chief executive Nikhil Rathi told MPs during a committee hearing this week that any move to make borrowing easier for first time buyers could lead to the rise of people ultimately losing their homes. He asked members of parliament if numbers doubled, “would that be an acceptable outcome here in Parliament, or would you say to us: ‘Why on earth have you let it go up by 100 per cent?’”.
It emerged last week that mortgage rules for first time buyers could be relaxed in plans reportedly being studied by regulators as the government looks for ways to grow the economy. The rules were tightened in the wake of the financial crisis, when borrowers could take on mortgages worth as much as 110 per cent of the value of a home.
Such loose lending was partly blamed for the mess banks found themselves in, with brands like Northern Rock and Bradford & Bingley disappearing from the high street because of their disastrous lending. Since then, banks have been told to stick to strict affordability criteria, typically only lending four to five times an applicant’s salary and testing what would happen to their finances if rates were to rise sharply. Mortgages that allow borrowing above 90 per cent of a property’s value are now rare and expensive.
