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Last Updated: Saturday, 20 October 2007, 15:07 GMT 16:07 UK
Lenders reject Darling's attack
By Paul Lewis
BBC Radio 4's Money Box

Chancellor, Alistair Darling
The Chancellor criticised mortgage lenders for helping boost prices
Mortgage lenders have hit back at accusations that they are responsible for the rapid rise in house prices.

Chancellor Alistair Darling said that house price rises were "unsustainable" and lenders should ensure borrowers "have not overstretched themselves."

But the Council for Mortgage Lenders said the chancellor's remarks were "mis-judged" and "behind the times".

The Treasury would not comment on the criticism but confirmed the chancellor's views.

Council for Mortgage Lenders' director general, Michael Coogan, told Money Box on Radio 4: "The chancellor is simply wrong in his assertion that it is the lenders' fault.

"I think it reflects someone who is behind the times and off the pace.

People should not be encouraged to get themselves into a position where they cannot make repayments
Chancellor, Alistair Darling

"It was his predecessor who was encouraging lenders to increase home ownership - a million extra home-owners in the last ten years - and set a target for that to be repeated in the next ten years."

Irresponsible lending?

But the Treasury said the chancellor stood behind what he had said to the Daily Mail: "unsustainable house price inflation is not good for individuals and is not good for the economy."

Mr Darling went on to criticise the mortgage industry for its role in boosting prices.

The comment from the chancellor that it is all caused by the lenders' irresponsibility is mis-judged
Michael Coogan, director general, the Council for Mortgage Lenders

"Lenders do need to be clear when they are lending money, that... someone can afford to meet the repayments and they have not overstretched themselves.

"And in the event that anything does go wrong, the house is worth what people say it is.

"People should not be encouraged to get themselves into a position where they cannot make repayments."

'Not so' according to CML

Mr Coogan responded strongly to any suggestion that lending had been irresponsible.

"Arrears remain historically very low, possessions are very low, and we have a million extra home-owners.

"The trend is likely to go up as a result of interest rate moves, or if customers have overextended themselves in other credit.

"But the comment from the chancellor that it is all caused by the lenders' irresponsibility is mis-judged."

The Treasury declined to comment on Mr Coogan's accusations.

Certainly we expect the rate of increase to soften
Charles Collyns, head of research at the International Monetary Fund

Mr Coogan went on to say his members were already tightening up on lending, as economic circumstances changed and the housing market would cool anyway.

Future prices

That view was supported by Charles Collyns, head of research at the International Monetary Fund, who told the programme: "Certainly we expect the rate of increase to soften.

"Our own projections are based on the assumption that house prices will be flat over the year ahead, but I would not rule out that house prices might also decline somewhat."

But Jonathan Davis of housepricecrash.co.uk rejected such predictions by the IMF and others.

He told the BBC that they were "economic nonsense by clear vested interests."

Over the next four to six years he forecasts "a national average fall of 30 to 40% and in some regions perhaps - particularly Northern Ireland - more.

"It is so crystal clear it is unbelievable - the vested interests know exactly what is going to happen but it is in their interests not to say."

BBC Radio 4's Money Box was broadcast on Saturday, 20 October 2007 at 1204 BST.

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SEE ALSO
External internet links
19 Oct 07 |  Moneybox
The Truth about Property quiz
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Sharp fall in UK mortgage lending
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Lenders withdraw mortgage deals
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