I remember being bombarded with mortgage offers when I was buying my house in 2006.
It was quite ridiculous what some of the lenders were willing to lend at the time, even though I was buying alone on a single income and had a comparatively modest deposit. Even more worrying was the amount the same banks were willing to lend to some of my friends who were buying at the same time with no deposit at all. A 100% mortgage was not rare in those days – some lenders even lent more than 100% on the basis the house prices were rising so fast!
How times have changed!
Today you’d get laughed out of the very same banks for even suggesting they might lend that sort of money without a 20% or 30% deposit minimum.
In fact I would suggest we have moved from the sublime to the ridiculous. Because now we have a situation where the banks are so overly cautious that they have simply blacklisted some people (first-time buyers for example) and indeed whole sectors (fashion retail no doubt falls into this category) and are refusing to lend to even the most successful individuals or businesses within these groups.
This is a major problem for our sector.
Fashion businesses always have difficult cashflows due to most of their money being tied up in stock so flexible lending terms are crucial – and therein lies the issue. To grow, they need banks to lend. And banks are reluctant to lend without a massive nest egg behind the business either in terms of valuable property or a lump sum. Not many fashion businesses, particularly small to medium sized ones, can boast either of those these days so banks refuse to lend to them.
This is a vicious circle because without flexible lending there will be no growth and we won’t come out of the financial crisis. It’s a stalemate that I think the government should step in to end. Banks should be required to lend if certain basic criteria are met.
I’m not suggesting a return to the bad old days of 110% mortgages but surely there has to be a happy medium?
Caroline Nodder, Editor, Drapers