Following calls from the Prime Minister, Gordon Brown, for more ‘prudent and careful’ lending, the City Minister, Lord Myners, has stated that the 100 percent mortgages that were once so popular in the UK were ‘foolish’.

He said that banks should never have offered these deposit free mortgages, and that the global credit crunch was the price that the banking industry had been forced to pay for being so reckless when it came to mortgage lending.

The Financial Services Authority is going to be looking at controls on loans over 100 percent. Prior to the credit crunch consumers had even been able to get mortgage loans for 125 percent of the property value, plunging them instantly into negative equity.

Lord Myners said that the banking industry has now realised the foolishness of offering 100 percent mortgages, and that vital lessons has been learned with regards to “reckless, feckless, witless lending”.

Myners added that it was now widely acknowledged amongst the banking industry that 100 percent mortgages had been “a foolish thing to do”.

He said: “We need to create systems through enhanced governance, more accountability and appropriate regulatory intervention to ensure that excesses do not occur.” He added: “We have learned some very, very expensive lessons globally about reckless, feckless, witless lending by a small number of banks.”

The Prime Minister said more caution was now needed in the banking industry, stating: “We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit.”

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