100% mortgages "immoral", expert says

Date:Monday 23rd March 2009
Author: Susanna Kavka

An expert has spoken out against the practice of providing consumers with mortgages worth 100 per cent of the value of their properties.

According to Gordon Pell, deputy chief executive of the Royal Bank of Scotland (RBS), such loans were an example of "bad banking".

He likened 100 per cent mortgages to giving consumers a "loaded gun" and said that such high loan-to-value ratios are "immoral".

Mr Pell also said that RBS would have no problem in sticking to more stringent mortgage limits if the Financial Services Authority (FSA) chooses to implement them.

Recently, the FSA's chief Lord Turner released the findings of his report into the UK banking sector.

In it, he raised the possibility of capping home loans in terms of either income multiples or loan-to-value ratios.

A separate more in-depth review into the mortgage market in Britain is due to be published by the FSA later this year.