Mortgage restrictions a "thoroughly bad idea"

Date:Thursday 19th March 2009
Author: Susanna Kavka

Proposals which may lead to caps being placed on mortgage lending have been described as a "thoroughly bad idea".

In a new review, Financial Services Authority chief Lord Turner raised the possibility of introducing caps on mortgage lending either in terms of loan-to-value ratios or income multiples.

In response to the suggestions, Ray Boulger from John Charcol said they would reduce consumer choice.

He added: "Some of the conclusions in the report are based on a worrying failure to understand all the dynamics of the mortgage market."

However, Mr Boulger welcomed the fact that the report warned that introducing restrictions on mortgage lending may have adverse effects.

For example, Lord Turner pointed out that the "democratisation of home ownership" will be adversely affected.

Earlier this week, John Charcol issued a statement saying that such restrictions would have a detrimental impact on first-time buyers and may also cause problems for people looking to remortgage.