Brown urges end to 100% mortgages

"The Loans Search...."

A return to "traditional" banking methods in Britain, as well as new curbs on 100% mortgages, have been urged by Prime Minister Gordon Brown.

He told The Observer that he wanted to see "prudent and careful" lending by the banks which should be the "servant" of the economy, "never its master".

Controls on the issuing of mortgages of more than 100% of a home's value would be considered by the Financial Services Authority after such loans pushed many borrowers into financial difficulties when the housing market crashed, Mr Brown said.

He added that it was important that first-time buyers on modest incomes who had been unable to build up large deposits were still able to get mortgages, even though banks are now more reluctant to lend.

"We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit," the Prime Minister said.

"We have got to get the balance between serving home owners better and encouraging responsibility in the housing market.

"This is a duty on banks and building societies, but we have also asked the Financial Services Authority to look at how in future we should control new mortgages for more than 100% of house value."

The Prime Minister said that there had to be a "clearer focus" by the banks on lending to UK firms, with companies still complaining that they cannot get the credit they need to carry on in business.

He indicated that discussions were still continuing with the banks on a plan for the Government to underwrite their so-called "toxic" assets to enable them to resume the flow of credit.

"In order to get lending going, we must continue to develop agreements that remove the uncertainty arising from banks being unsure of their losses in return for improved lending conditions for families and businesses," he said.

"We want to ensure that the new banking system that emerges over the coming years meets all these requirements - and becomes the servant of our economy and not the master."

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