Government Plan to Restrict 100 per cent LTV Home Loans

Mon, 23 Feb 2009

Prime Minister Gordon Brown has announced he wants to ban 100 per cent loan to value mortgages in a bid to eradicate irresponsible lending . The move is part of his plan to save the banking system, which involves another bailout costing up to £500 billion. With the prime minister requesting the City regulator to preclude lenders from being able to provide loans for the full value of a property, buyers would be forced to provide a deposit of at least 5 per cent, even if and when the market fully recovers.

Amongst the new measures, which spell bad news for first time buyers, is a government insurance of banks’ toxic assets, which could account for up to £400 billion of the plan as risky debts are set aside into a debt . £10 billion would be injected into the nationalised Northern Rock to issue new mortgages, whilst the government is also seeking permission to begin £100 billion of quantitative easing – the drastic measure of printing money.

Mr Brown said, ‘We want to see the reinvention of the traditional savings and mortgage bank in Britain, making loans on prudent and careful terms.’
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