Proposals in the Vickers report are unlikely to have an impact on mortgage availability and pricing in the short term – but are expected to make it harder for first-time buyers to find loans.
Analysts have warned that the Independent Commission on Banking’s recommendations – to separate banks’ core retail operations from their riskier investment banking businesses and increase their capital requirements – will reduce their ability to lend and push up the cost of mortgages.
Andrew Hagger of Moneynet, the financial data provider, warned that the cost of the changes could fall on savers and borrowers.
“You do wonder where the additional cost burden will end up,” he said. “It could be a combination of savings rates being poorer and lending rates being higher – or we could possibly see some new costs being introduced.”
First-time buyers, or borrowers with only a small deposit, are likely be the worst hit if banks reduce the amount of new lending, as the type of mortgages they need are the most costly for banks to offer.
However, because the proposed reforms are to be phased in by 2019 – the same year as the new Basel III capital requirements come into effect – mortgage brokers said it was difficult to determine what specific impact the Vickers proposals will have.
“It will be impossible to separate out, realistically, the extra costs banks will incur from complying with Basel III from those incurred as a result of Vickers, together with other factors influencing pricing over the next eight years,” said Ray Boulger of John Charcol, the mortgage broker. But he concluded: “If they are required to hold more capital, it reduces the amount they can lend.”