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FSA proposes 'maximum limits on loan-to-value ratios'

Tuesday, 23 March 2010 12:00 AM

The Financial Services Authority (FSA) has indicated that restricting mortgage rates could help prevent a boom-and-bust culture in the housing market.

FSA Lord Adair Turner proposed introducing "maximum limits on loan-to-value ratios" to curb asset price bubbles in commercial or residential real estate.

However, the suggestions have come into criticism from Bernard Clarke, communications manager for the Council of Mortgage Lenders.

He commented: "We don't think that that's an appropriate approach; we think it's a blunt tool in terms of addressing the real sources of consumer detriment."

Mr Clarke noted that the Council of Mortgage Lenders does not favour credit control because of the risks it poses in excluding some consumers, who would not be able to access to a mortgage even though they could sustain the commitment.

Data from Mortgages.co.uk recently showed that before the recession, a number of mortgage lenders, including Alliance & Leicester and Northern Rock, offered 125 per cent mortgages.

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