Saturday, 8 December 2007


Some people have no shame. After years of reckless lending activity, mortgage lenders would now like to portray themselves as helpless victims of the credit crunch, needing government assistance.

In an article in the FT, Michael Coogan, Director General of the Council of Mortgage Lenders, believes that the ailing mortgage market needs the "the help of government and the Bank of England".

The "twin earthquakes" of UK mortgage market - the closure of the capital markets and the first run on a British bank in 140 years - has left UK lenders struggling to finance their activities. Next year, lenders need to find about £90 billion, about £60 billion will be financed from savings, leaving a £20 billion to £30 billion shortfall needing to be financed by the wholesale markets.

"If the capital markets fail to reopen next year, it could lead to less innovative products – because lenders will be keeping the risks on their own balance sheets – tighter lending criteria and more expensive home loans."

But that sounds great to me - tighter lending criteria will protect people from taking out loans that they can't pay back, preventing years of misery and distress. More expensive home loans will also discourage speculative investors, who have distorted the housing market in recent years.

As for the current problems facing the mortgage industry - it is not the fault of lenders. "I don’t apologise for this industry giving finance for every type of housing." However Coogan liked this week's interest rate cut. Can we have some more of that please; easy money is the answer to all problems.

So there you have it; Coogan accepts no responsibility for the housing crisis or the credit crunch but he demands easy money and more government help.


Anonymous said...

Absolutely shameless

Anonymous said...


To a degree I agree with you. But would you consider the debasement of the currency to be a factor pressuring the banks to go for higher and higher returns?

What is more, do you remember members of the current government not so long ago harangueing the banks for not lending to poor people? Doh!

So while I agree the banks have behaved stupidly, they have been under exceptional political pressure to lend, and lend wrecklessly too.