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| Mortgage curbs cause anger NatWest and Alliance & Leicester have angered competing lenders by introducing curbs on mortgages in areas where prices have risen sharply. The banks said they had done so because they want to protect borrowers from a potential fall in property prices but some mortgage advisors have warned the policy could trigger falls. "We don't want to increase the risk of negative equity for people," a NatWest spokesman told BBC News Online. A cost to the borrower would lead to a cost to the lender, he added: "It's not cheap to repossess people's houses". London and the South East "We have revised our policies on lending in certain areas of London," the NatWest spokesman said, noting that about one in four London post codes are affected. Similarly, Alliance & Leicester has decided not to lend more than 90% of a property's value in London and the South East for houses costing more than £100,000. "We were concerned about the very high rises in prices in those areas," spokesperson Ginny Broads told BBC News Online. "It's about the overall uncertainty" in the wake of 11 September, she said. Several mortgage professionals fear that limiting loans could in fact cause prices to crash. "If a major lender restricts lending in certain areas, it could affect property values," Ray Boulger of independent financial advisor Charcol told the Daily Mail. "It will hit first-time buyers hardest and that will affect the rest of the market," said Halifax group economist, Martin Ellis. Halifax, Nationwide, HSBC, Barclays and the Woolwich all said they have no plans to raise deposits on mortgage lending. Halifax will raise the issue with the Council of Mortgage Lenders, the Daily Mail said. "We want to ensure that others do not follow suit," the bank told the newspaper. "You can't haul someone in front of the Council of Mortgage Lenders," the NatWest spokesman told BBC News Online, dismissing the threat. Ms Broads pointed out that the Council accepts that mortgage lenders should be free to make such decisions individually. "It is a matter for individual banks and building societies to establish their own position," said a spokeswoman from the council. Neither bank would divulge further details about which areas would be affected by their policies. And they both stressed that they were not predicting that house prices were about to crash. NatWest said the limits would be focused on loans where a borrower would raise 90-95% of a property's value. The latest figures from the Council of Mortgage Lenders show that lending rose 35% in 2001 though almost a third of the new loans represented remortgaging. "Last year was extremely favourable for home buyers, with record levels of lending for house purchase and remortgaging," said the council's director general, Michael Coogan. "The aggressive cuts in interest rates during recent months have helped to offset any adverse impact following 11 September," he said. Looking ahead, "the housing and mortgage markets will grow less strongly in 2002," Mr Coogan said. "While the economic outlook remains positive, small rises in interest rates and higher unemployment are expected." "Borrowers need to think how this may affect their household finances and whether they need insurance to cover their mortgage payments if they lose their jobs," he said. 21st January 2002 |
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