Banks Accept Banning 100% Mortgages

Saturday 21 March 2009

The deputy chief executive of the Royal Bank of Scotland declared that lending mortgages to borrowers with no deposit are immoral and are to be banned. Gordon Pell of RBS described 100% mortgages as "bad banking", which hurts the interests of borrowers. This statement seriously affected the decision of the FSA to ban 100% mortgages. The City watchdog said it will consider placing restrictions on mortgage lending based on salary multiples or loan to value ratios. Mr. Pell has just returned from Singapore, where banks do not lend more than 80% of the property value or a certain multiple of annual salary. RBS believes the bank will be content if similar regulations are imposed on British banks, as well as it is determined it will be able to work in toughened conditions. RBS has always been a cautious lender and gave out only a handful of 100% mortgages. The bank also plans to soon reconsider its lending policies with an intention to make lending requirements stricter so that borrowers will face fewer risks associated with missed payments and banks will be protected from default. Although many banks have already withdrawn risky offers, the Prime Minister still called for more responsible mortgage lending.