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cashinmattress

Mortgages Will Get More Expensive, Lenders Warn

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Mortgages will get more expensive, lenders warn

Lenders have quashed expectations of a return to the days of high loan to value (LTV) mortgages by warning that funding restraints are ongoing and unlikely to ease in the near future.

Dispelling any hopes that there is a glut of cheap credit set to come on stream which could boost the housing market, the Council of Mortgage Lenders (CML) said its members' ability to extend more credit was 'constrained for the foreseeable future.'

A spokesman for the CML - whose members cover 98% of all residential mortgage lending in the UK - said: 'The underlying problem is that we don't have access to the range and type of funding we used to have.

'Government intervention (namely through lending agreements with semi-nationalised banks) has improved the situation but the constraints on lenders are real.'

The CML said there was 'no realistic prospect in the foreseeable future' of the situation changing rapidly, although they said lenders were trying to make up for the loss of capacity.

The CML made its comments in response to support services firm Sesame which said lenders needed to take action to encourage first time buyers into the market and therefore help tackle the risk of a stagnation in activity.

High loan to value deals have all but dried up since the credit crisis began, with lenders demanding higher deposits and offering less attractive rates. Sesame said lenders needed to 'step up to the plate' and start lending at higher LTVs.

John Cupis, managing director of mortgages and general insurance at Sesame, said: 'Now is the time to resume normal risk-based lending and to move back to the core competency of assessing risk and demonstrating underwriting skills.'

'Government-owned banks have recently made some effort to lend at higher loan to values, but what is really needed is a widespread commitment by all lenders to increase to a minimum of 90% LTV, including through intermediaries.'

Cupis added that while Sesame knew how tough the pressures were on balance sheets, capital and profits, such was the importance of home-ownership in the UK that lenders needed to step up the flow of mortgage funding for first time buyers.

But the CML said pressures on lenders were ongoing and would result in mortgage products increasing in price, rather than diminishing.

It said: 'Lenders are facing a range of higher costs, including the costs of showing increasing forbearance to more borrowers, and the increased costs of holding more liquid assets and more capital required by the FSA.'

'As lenders will face increasing costs for some time, upward pressure will remain on mortgage spreads on new products.'

Of course. What they don't make in volume they will make up in margin. Simple economics really.

One thing that worries me, not now, but in the future, will be a state sponsored relaxation of the credit worthiness criteria. There will probably be about 75% of the population or greater who will have faced near or complete financial ruination by the time this recession/depression is done, and all of these folks would be, by today's standards, barred from any form of credit.

Banks cannot exist on these minuscule numbers and have already breached every covenant. Government needs the taxes raised from the financial transactions. It's the coming reward of incompetence, ineptitude, and irresponsibility which I worry about.

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I like the CML.

their warnings about the past are always 100%.

20/20

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Dispelling any hopes that there is a glut of cheap credit set to come on stream which could boost the housing market, the Council of Mortgage Lenders (CML) said its members' ability to extend more credit was 'constrained for the foreseeable future.'

only a madman would hope for that

cyclops%20gordon%20brown.jpg

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Margin is only what counts now, they have huge losses to make up for their recklessness and now the consumer pays once via a tax subsidy to the banking industry and then pays again with higher interest rates.

Bankers are parasites.

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Lenders have quashed expectations of a return to the days of high loan to value (LTV) mortgages by warning that funding restraints are ongoing and unlikely to ease in the near future.

"You remember that well we used to draw a lot of the water from until we discovered it was poisoned when killed off half the village? We're still not using it."

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