MPs launch attack on mortgage lenders

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The Independent Online
Banks and building societies were yesterday accused of "unethical behaviour" by an all- party committee of MPs in refusing to provide fresh mortgages for ex- council properties on which they have lent in the past. Thousands of families have been trapped in homes - usually high-rise or system-built flats - which they cannot sell, the Commons Environment Select Committee said.

The situation was producing a "spiral of decline" on estates where much public and private money had been invested, Roy Thomason, a Conservative member of the committee, said. As owners walked away from their unsaleable homes, or cash buyers acquired them at one-third of their former value and let them to sometimes disruptive tenants, "all the positive work that has gone into many of the areas involved" can be destroyed, the committee said. That meant even more new homes would be needed to replace those lost.

The attack on "red-lining" by mortgage lenders - defining areas in which they will not lend - came as they cast serious doubt on the Government's projections of future housing need. More social housing than the Government plans - housing association and council homes built for affordable rents - is badly needed, the MPs said.

Exact numbers of "red-line" properties are unknown, but Gerald Jones, Wandsworth council's chief executive, told MPs that at least 3,500 former council properties in his south London borough were affected and matters were getting worse. "Some lenders are now refusing mortgages on many traditionally built and low-rise ex-council flats."

Yet at the end of the Eighties "lenders were literally falling over themselves" to lend on almost any type of property.

The committee said: "The lending institutions must accept that wherever they are prepared to lend on new or newly privatised homes, they are entering into a commitment which is no less long-term than that entered into by the borrower."