OpinionFeb 28 2013

Support new borrowers as well as new banks

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At first glance this helpful attitude should boost the market, giving consumers more choice and battling against the dominance of the main lenders.

However, the support seems to be based on a couple of assumptions, one that anyone would want to establish a bank in an environment of intense regulatory scrutiny, and another that more lenders are needed.

In recent years new entrants such as Tesco Bank, Metro Bank, Aldermore and Castle Trust have launched into the UK.

However, best buy tables continue to feature the usual suspects, and the new boys rarely reach the top.

With less capital, would a new entrant be able to offer any better rates? Speak to most mortgage advisers and they will tell you that rates are not the problem, it is affordability tests and loans to value.

It is all very well having lots of lenders, but it is no good if all expect a first time buyer to magic a £30,000 deposit.

There is already a lot of government and regulatory work being done on the supply side of the mortgage market, from funding for lending to FirstBuy and NewBuy schemes. Supporting new entrants will help this, but it will be to no avail unless the demand side is given a boost.

Borrowers could be better supported by indemnities on high LTVs or limits on buy to let portfolios to allow housing stock and perpetual renters be freed.

New entrants are all well and good, but not if there is no-one to lend to.