No more Ninjas

The UK mortgage market never quite reached the same level of insanity as that of the US, where "ninja" mortgages (no income, no job or assets) were a major contributor to the financial crisis. We got pretty close, though, with so-called "self certified" mortgages, in which the lender took the borrower's word for how much they earned and how big a loan they could afford to service. Amazing to relate, some borrowers lied about their circumstances, and some of these idiotic loans went bad.

The FSA seems to have learned a lesson from this, and is planning to ban self certified mortgages, although bizarrely, it's giving the industry until mid-January to respond to the proposal. You wouldn't think there'd be much to discuss, but this quote from the Council of Mortgage Lenders suggests you'd be wrong:

"It is ironic that at the same time as politicians are seeking to encourage lenders to increase their flow of mortgage lending to consumers, they are also keen to take steps to address the perception of 'irresponsible lending'," the CML said.

Two things come to mind here. First, like Alanis Morissette, the CML has no idea what the word "ironic" means. Second, it's hoping that politicians and taxpayers have very short memories.

I heard someone from a mortgage brokerage on the radio just now commenting on the proposals. She warned that any new credit checks that were required as a result of the FSA's stance would inevitably add to the cost of borrowing. That's in contrast, of course, to the costs of irresponsible lending, which can, as we know, simply be dumped on the taxpayer.

Forget the alleged return of the bonus culture -- at least that will generate some chunky tax revenues. It's the possible revival of the bad old lending practices of mid-decade that the Government should really be worrying about.