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Deposit free mortgages were a bad idea

April 2, 2009 by admin  
Filed under News, News-Mortgages

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City Minister, Lord Myners, has recently stated that the 100 percent and 125 percent mortgages that many lenders used to offer to borrowers in the UK were a bad idea. Myners described these mortgages as ‘foolish’, adding that banks should never have offered these mega mortgages.

This type of mortgage was once very popular, particularly amongst first time buyers with little or no deposit to put down. However, since the onset of the global credit crunch lenders have stopped offering these mortgages

As the Prime Minister, Gordon Brown, called for more ‘prudent and careful’ lending, Lord Myners said that the global credit crunch was the price that the banking industry was now paying for exercising reckless and irresponsible lending practices over the past decade. He said that as a result of the current financial crisis banks had learned valuable lessons with regards to “reckless, feckless, witless lending”.

Lord Myners added that the banking industry had realised that it had been foolish to offer 100 percent mortgages, and most are now in fact looking for deposits of at least 10 percent if not more.

The minister said: “We need to create systems through enhanced governance, more accountability and appropriate regulatory intervention to ensure that excesses do not occur.”

He continued: “We have learned some very, very expensive lessons globally about reckless, feckless, witless lending by a small number of banks.”

Gordon Brown has also called for more caution to be exercised in the banking industry, stating: “We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit.”

Tags: deposit free mortgages, Banking, Britain, huge deposit, accountability, uk, result, free mortgages

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