Morning Papers: Risky lending hits 2008 levels

New figures have revealed the number of home buyers with a deposit of less than 10 per cent and a loan worth more than 3.5 times their income has risen to its highest point in over five years, the Telegraph reports.

Bank of England figures show the number of higher risk mortgages increased in the first three months of this year.

New lending to borrowers with less than a 10 per cent deposit and a loan-to-income multiple of over 3.5 times for a single income, or 2.75 times for joint income borrowers, increased to 2.6 per cent, the highest since Q4 2008.

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Two state-owned banks recently announced they were applying a strict four times income multiple on Londoners seeking a mortgage over £500,000.

Lloyds Banking Group announced this first, notably three days after Bank of England governor Mark Carney warned in an interview the Bank may itself cap income multiples to prevent a bubble. RBS closely followed Lloyds’ move.

Other major lenders in the market told FTAdviser they would not seek to follow suit without being forced to by regulators, with HSBC in particular hinting that it saw the move as a blunt instrument by saying it was “rare for income multiples to be the deciding factor” in affordability.

The new BoE figures follow warnings from the European Commission who, at the beginning of this month, urged the chancellor to rein in his controversial Help to Buy scheme in a bit to stop house prices escalating.

The EC called on George Osborne to “deploy appropriate measures”, including potentially increasing council tax, in a bid to control rising house prices, particularly in London.

The scheme has come under much criticism recently and has been blamed for pushing annual house price growth to double digits.

The EC’s proposals were outlined in a document designed to tell Europe’s five biggest economies how they can “make growth stronger, more sustainable and more inclusive”.

However, recent figures published by the Treasury revealed the second phase of the government’s Help to Buy scheme has provided a “much needed lifeline to the housing market recovery in the regions”

The Organisation for Economic Co-operation and Development said in its latest report that Britain’s housing market, buoyed by record low interest rates and several government-backed subsidies for home buyers, was in “danger of over-heating without further action by ministers and regulators”.

Apple’s Irish affairs in the spotlight

According to the Financial Times, the European Commission is preparing to launch a “formal investigation” into Apple’s Irish tax affairs today (11 June), “marking a significant step up in the global crackdown on tax evasion”.

The investigation will centre on Ireland but EU diplomats expected that “the net could be thrown much wider to include a number of companies taking advantage of tax breaks in other European countries such as Luxembourg and the Netherlands”.

The move by Brussels opens the question of whether companies received rulings that breach the EU’s rule book on state aid – a regime that bans tax breaks to favoured businesses that would create serious distortions of competition.