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MPs demand answer to Govt 2007 lending contradiction

Treasury Select Committee MP Jim Cousins has challenged why the Government is urging a return to 2007 lending levels for some banks while nationalised Northern Rock and Bradford & Bingley are managing their loan books more tightly.

Speaking at a select committee session on the economics of the housing market this morning Labour MP Jim Cousins questioned whether it was a “contradiction” that the state owned Northern Rock and Bradford & Bingley were looking to recover loans while the banks that are set to receive a Government capital injection Royal Bank of Scotland, HBOS and Lloyds TSB are being asked to return to 2007 lending levels.

Cousins says he believes the fact Northern Rock has been able to repay £10bn of its loan has more to do with loans being repaid by existing customers than money being generated by new business.

Also speaking at the session professor David Miles of Imperial College London told MPs that house prices could have a further 5-10 per cent to fall before we reach the bottom of the market, meaning they will have dropped 20 per cent from their peak.

Professor John Muellbauer of Nuffield College said he thought house prices were seeing some of the “biggest falls since records began”.

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