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L&G calls for changes in loan timing

Legal & General is calling on lenders to change the way they release mortgage funds to stop frantic rushes for the most attractive deals, followed by repricing.

Director of housing Stephen Smith says mortgage offers are usually made well in advance of when the funds need to be drawn down. He believes lenders should commit to lending the money when it is needed rather than making it available immediately.

He says such a move would require co-ordinated action from lenders and L&G is talking with a number of key lenders about the proposal.

Smith says: “Today’s systems and procedures have been set up for an oversupplied market where a mortgage offer is given to you well in advance of when you actually need to draw down the funds.

“If you thought the market was going to right itself and return to what it was like this time last year within the next couple of weeks, you would not bother changing things. I think most people now appreciate that these conditions will not go away for some time, so it is worthwhile investing some time and effort in coming up with medium-term solutions.”

Brentchase Financial Services mortgage specialist Mike Fitzgerald says: “Such a system worked in the 1960s but the markets have moved on from then. This would be like turning the clock back. It is good for people to float ideas around but I do not think that this would work.”

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