Discussing the impact and implications of the changes taking place in the provision of mortgage finance, in the United Kingdom and internationally, the Governor stresses the need for caution and self-restraint in the new, more competitive, environment. He argues in particular that:
- 'The intermediaries themselves... face greatly compressed risk/reward ratios. To some extent a narrowing of margins is to be expected as competition intensifies, but it is important that this process does not overshoot.'
- 'As far as risks are concerned... institutions must resist pressures to allow lending criteria to become excessively lax. In the United Kingdom, income multiples available to borrowers have tended to edge up... at a time when low inflation and high real interest rates might suggest that more exacting conditions should be applied.'
- 'It is important that mortgage lenders think carefully about the adequacy of the safety margin provided by the value of the underlying property relative to the loan outstanding.,
- 'While house prices remain buoyant in the United Kingdom, lending policies should not be based on the premise that house price rises will continue apace.'
- 'It is important that... high standards of behaviour are maintained towards borrowers facing difficulties; and it would be preferable if practitioners devised and enforced their own standards of acceptable behaviour.'