Monday 22nd October 2007
The "unsustainable" level of house prices is the fault of mortgage lenders, according to chancellor Alistair Darling.
He claims that the willingness of lenders to extend income multiples and loan-to-value (LTV) ratios beyond historical limits has seen consumers taking on more debt than they can afford.
"Lenders need to be clear that somebody can afford to meet the repayments, whatever they are - that they havent been overstretched," he asserts.
And he suggests the financial services industry as a whole should be monitored more closely to reduce the likelihood of a crisis similar to that which took place at Northern Rock.
"We have got to make sure we have a far better surveillance system to spot these problems and take action," Mr Darling explains.
But an industry insider called the chancellor "behind the times and off the pace" in an interview with BBC Radio 4.
Director general of the Council of Mortgage Lenders Michael Coogan told the networks Money Box programme: "It was his predecessor who was encouraging lenders to increase home ownership."
"Arrears remain historically very low, possessions are very low and we have a million extra homeowners," he added.
Mr Coogan claimed that arrears and repossessions may escalate in the coming months due to elevated interest rates and other forms of lending.
But he refuted the accusation that mortgage providers should be held responsible for the entire problem.
And Mr Coogan concluded that, in light of the credit crunch, many mortgage providers have already begun to tighten their lending criteria when approached by individuals on the edge of affordability.
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