Brown Must Act On Lending

2.52.40pm BST (GMT +0100) Tue 20th Jul 2004

Commenting on new figures from the British Bankers' Association showing increased mortgage lending, Liberal Democrat Shadow Chancellor, Dr Vince Cable MP, said: "The rise in lending by banks and building societies is still fuelling the housing market.

"The recent rises in interest rates do not appear to have deterred larger numbers of people from entering the market and building up their housing equity despite warnings from the Governor of the Bank of England, among others, about a probable crash in house prices.

"This continued trend underlines the importance of the Government and the Bank of England having other mechanisms for moderating the growth in mortgage lending.

"An active policy of using bank reserve requirements would stop some of the excesses which threaten serious financial difficulty for many borrowers when the market goes into a downturn."

ENDS

Notes

1. British Bankers' Association figures out today show mortgage lending accelerating again - up £6.5bn in June compared to £5.1bn in May and a monthly average of £5.7bn 2. The Liberal Democrats' ten-point plan for dealing with household debt comprises:

1. The publication and monitoring by the government along with the Bank of England and the Financial Services Authority of measures of sustainable household debt, along the lines of the government's own fiscal rules.

2. Guidance to banks on safe to loan value ratios and income multiples for mortgage borrowers based on independent assessments of asset values by a group operating in a similar manner to the Bank's Monetary Policy Committee.

3. Active use of reserve deposits to reduce destabilizing boom and bust in mortgage lending.

4. Curbs on the tidal wave of unsolicited credit promotion by demanding a prominently displayed 'Credit health warning'.

5. A crack down on exploitative loan sharking, with promised legislation on consumer credit to tighten up on the issuing and monitoring of credit licenses, coupled with harsher penalties for those guilty of bad practice.

6. Stopping early, often hidden, redemption penalties, so as to discourage the early clearance of debt.

7. Stronger enforcement of OFT rules to prevent abuses associated with misleading advertising by debt management and advice services.

8. Excessive interest rates on store and credit cards to be far more vigorously policed by the competition and trading authorities.

9. An extensive network of centres for independent, low cost, financial advice supported by credit providers and the investment industry.

10. Widening the remit of the social fund to permit emergency short term lending in a reaching fund for low income families in financial crises.