Move to tighten mortgage lending

It appears that now the horse has well and truly bolted, financial policy and regulatory groups would like to nail the stable door shut against high salary multiple, 100 per cent and self certified mortgages.

Left:When Bess overheard the trainers talking about a level playing field she laughed so much she nearly broke the stable door

It is right and proper that failed systems are corrected but what will a tightening of lending criteria mean to the mortgage market?

Regulators are looking to bring back the bank managing styles of the old, careful, steady handed managers that were well known and highly respected locally. But is this possible in today's market?

Bank managers in the 1960s and 1970s were not under pressure to hit targets and those of us around at the time lived in a ‘local' world, unlike the target driven global world we find ourselves in today.

Branches are no longer looking over their shoulder at the bank down the street instead they are competing against internet banks and banks on a national and even international scale.

Generally in the 60s and 70s a combination of a deposit and set income multiples meant that even first time buyers were able to get on the housing ladder. To be fair, house prices were lower then making it easier to save for a deposit and get within the available lower salary multiples.

Will that be the same tomorrow or will the size of the deposit needed exclude many people? If a consequence of stricter lending is that the housing market could be adversely affected because people can't afford to buy, will it ultimately mean that the stable door will actually need to be left ajar to high multiples? Or will shared equity schemes and schemes for key-workers become the norm? 

I suppose an alternative theory could be that the proposed lending constraints, together with the current correction in house prices, will produce even lower property valuations in the foreseeable future and it is this which will help people onto the housing ladder.

Either way, it will be interesting to see how tomorrow's banking system combines responsible lending with the need for profit.

Sylvia Waycot, Publisher - Moneyfacts Group