CML dismisses sub-prime mortgage fears

Fears that the UK sub-prime mortgage market is headed for a crisis similar to that in the US and that lenders are engaging in irresponsible lending practices have been dismissed by the Council of Mortgage Lenders (CML).

In its fortnightly newsletter, the council referred to recent figures showing that the number of repossessions increased in the first half of the year and said that this "naturally" led to allegations of irresponsible lending.

"There is absolutely no benefit to lenders in lending to people who cannot afford to pay back the loan," the CML said. "Not only will lenders risk breaking the Financial Services Authority's mortgage rules, it also has a number of unattractive commercial and reputational implications."

There were around 14,000 possessions in the first half of 2007 and, while this was a 14 per cent rise on the second half of 2006, the CML stressed that this number is low by historical standards.

In 1991 there were 76,000 possessions and 183,600 people in arrears of between six months and a year.

Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: "All lenders and especially those in the sub-prime markets are very aware of the need to manage arrears as fairly and effectively as they can and they will be working closely with the borrowers in difficulties."

Fears that the market for sub-prime mortgages would lead to problems in the UK as it has in the US were also played down by Roger Bootle of Capital Economics, who pointed out that the sector accounted for only five to six per cent of the industry in 2005.

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