Darling threatens mortgage-shy banks with legislation

24 November 2008 / by Rachael Stiles
The chancellor Alistair Darling is today expected to threaten banks with legislation if they do not make it easier for consumers to secure a mortgage or an overdraft.

At a time when money is tight and household budgets are stretched, Mr Darling is urging banks to ease lending conditions for borrowers in his pre-budget report later today. In many cases, banks have been withdrawing the best mortgage deals and tightening criteria on overdraft borrowing.

The chancellor will announce plans for a 2.5 per cent one-year VAT holiday and tell banks that if they refuse to lend then he will bring legislation against them, which he hopes will mean that the UK economy will come out of recession and recover by 2010.

Darling is expected to voice the frustration which the Government feels towards high street banks, which have been making it harder for borrowers to secure a home loan whilst falling house prices threaten them with negative equity and repossession figures rise.

Banks have remained tight-fisted with their mortgage lending, despite the huge injections of taxpayers' money into the banking system, including the £37billion made available to the banks in order to encourage them to start lending again, both to each other and to the public.

If the banks do not change their ways and agree to improve their code of practice, the Government will consider taking legislative action against them which would require the banks to give customers fair notice before changing or withdrawing their products.

The Government must "persuade and cajole" the banks into resuming lending, and at affordable prices, said the prime minister. "You will see in the pre-budget report and subsequently a number of measures that will actually make that happen more quickly." he said, according to The Guardian.

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