Brown signals 100% mortgages curb

Gordon Brown has said he is considering curbs on 100% mortgages to encourage more responsibility in the market.

The prime minister said the Financial Services Authority would be considering controls which will force people to save for longer before buying homes.

Writing in The Observer, he called for a new age of sobriety in UK banking, calling for the return of "prudent", old-fashioned high street banks.

He also said banks should not dabble in complex international investments.

Critics have described the calls as "humbug" after Mr Brown's previous support of light-touch bank regulation.

During his time as chancellor, the prime minister was openly critical of other European banking systems for their strict regulation and inflexibility.

Britain, he said, was strong because of its light-touch regulatory environment, which encouraged investment and created jobs and wealth.

But BBC political correspondent Joe Lynam said the credit crunch and the ensuing financial crisis had changed Mr Brown's attitude to banking.

In The Observer, the prime minister sketches out a future where bankers will be the "servants" rather than the masters of Britain's currently ailing economy.

We have got to get the balance right between serving homeowners better and encouraging responsibility in the market Gordon Brown

He says the Financial Services Authority will be considering controls on mortgages of more than 100% of a home's value and so-called high multiple mortgages offering loans of up to six times an applicant's salary.

More caution in the mortgage market, he says, would reduce chances of a future property crash.

Mr Brown argues "more responsible" banking will restore trust and unlock more business and mortgage lending for families and businesses.

He wants banks to make loans "on prudent and careful terms, not just to people with large deposits but to first-time buyers and those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit."

'Absolute madness'

He went on: "We have got to get the balance right between serving homeowners better and encouraging responsibility in the market."

In the article he rules out legislation to create a "rigid divide" between retail high street banks, which offer standard deposit accounts and loans, and investment banks trading globally in complex financial instruments.

Mr Brown believes pressure from consumers seeking somewhere safe to put their money will drive banks back to a model more common before the de-regulatory "big bang" in the City.

But Alex Brummer, City editor of the Daily Mail, told the BBC it was "humbug" for the prime minister to now ask people to forget those years of deregulation when bankers could "do what they wished".