Loan assumption 'too high' for landlords'

The Council of Mortgage Lenders (CML) has called on the Financial Services Authority (FSA) to drop the ten per cent deficit assumption to social housing loans, declaring that it is currently too high for landlords.

Following the collapse of the US sub-prime mortgage market, mortgage lenders have declared that they would lobby against the FSA's 'imposed' assumption as they were confident that lenders could assess loan risk to safeguard against defaults, according to Inside Housing.

Andrew Heywood, deputy head of policy at the CML, stated that lenders would "be prepared" to accept an assumption less than the current level.

Inside Housing reports that several banks and building societies support the CML's position as many fear that such an assumption could force small-scale lenders to withdraw their involvement from the social housing lending market.

Piers Williamson, chief executive of the Housing Finance Corporation, stated: "The smaller ones have to put more capital against loans relative to others because it will mean tighter pricing. This will lead to more concentration of lending with even fewer lenders."

This week, the Mortgage Provider Online has documented how research by Paragon
Mortgages and Birmingham Midshires has shown that buy-to-let landlords are enjoying increased demand as a result of a house price slowdown.

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