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Press Release

CML comment on mortgage lending cap speculation

16 June 2010

Responding to today's speculation that the Chancellor is set to announce that the Bank of England will gain new powers to impose limits on the type of mortgage lending that lenders will be able to undertake in the future, the Council of Mortgage Lenders says it is vital that there should be a logical discussion of what objectives such a measure would be designed to achieve.

The characteristics of today's market are not likely to stoke risky mortgage lending, and the international and domestic measures already under way will further dampen down the appetite for risk.

CML director general Michael Coogan comments:

"We need to remember that in the UK it was not risky lending that caused the banking problems, it was banks' inability to refinance their borrowings due to the shutdown of global financial markets.

"We also need to remember that what is currently bothering most people about the mortgage market isn't high-risk lending, but the fact that lending is so constrained into low-risk borrowers that it may be making it more difficult for the economy to grow as individuals and businesses find it more difficult than they would wish to borrow.

"It may make sense – depending on the detail – for the Bank to have tools such as this at its disposal. But, it is surprising to see such attempts to target specific sectors such as the mortgage market when the new and onerous capital regime – which will be the most effective tool in influencing lending decisions going forward - will dampen risk appetite and manage risk in lending across the board.

"Policymakers need to be very careful to avoid trying to solve the wrong problems – the much bigger problem for the mortgage market for the foreseeable future will be in raising enough money to lend, not the risk of stoking asset bubbles through over-generous lending."

The CML estimates that around 2.5 million mortgages outstanding - around a quarter of all mortgages - are for more than 75% of the value of the property.



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Council of Mortgage Lenders

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