Executive chairman Peter Williams has sent evidence to the Government revealing the massive gap in capital adequacy requirements.
Williams says: “The example we sent was for a £100,000 mortgage, at 70 per cent LTV, the capital needed by banks is under £100, but for 100 per cent mortgages that increases to around £13,000. That is an increase of 185 times.”
Imla says one way to even up the balance would be to create Government or privately sponsored mortgage indemnity guarantees, which would offset the risk and in turn allow for less capital. But Williams says Government officials and lenders are currently uncomfortable with the idea of guarantees after all the problems surrounding them in the 1980s and 1990s.
He says: “These figures illustrate why lenders are so much more sensitive about LTVs right now. It is going to be a big issue.”
Brentchase Financial managing director Mike Fitzgerald adds: “The lack of higher-LTV loans are stalling the market. Unless we find a way round this problem, we are going to be in the doldrums for years to come.”