Cap on mortgage lending 'would hurt FTBs'

Date:Tuesday 17th March 2009
Author: Susanna Kavka

Placing a cap on mortgage lending would hurt first-time buyers (FTBs), according to one firm.

This week, the Financial Services Authority (FSA) is due to publish proposals concerning how much banks and building societies should be able to lend to home buyers.

One of the ideas expected to be put forward by the authority is a restriction on the amount homebuyers can borrow of three times their annual salary.

Responding to the ideas, John Charcol said they would have a detrimental impact on FTBs.

It stated: "If mortgages are limited to three times [consumers' incomes] many borrowers who have borrowed more than that, but have a perfect credit rating, would be denied the opportunity to remortgage or move house."

This would place them at the mercy of whatever rate their current lenders choose to offer them, the company added.

It went on to say that going back to "old fashioned" income multiples would be a "seriously retrograde step".