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UK Government moves to shore up banking syste -

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ELEANOR HALL: The British Prime Minister Gordon Brown is looking at outlawing the 100 per cent
mortgage, as part of a raft of measures intended to save the UK banking sector.

But critics say the Government's words of caution against mortgages that represent more than the
value of the houses they're funding is hypocritical, given some of its other policies.

Europe correspondent Emma Alberici reports.

EMMA ALBERICI: At the height of the property boom in the UK there were more than 150 mortgage
products offering people funding for up to 125 per cent of the value of their homes.

In hindsight, the Government thinks lending more than a house is worth was a bad idea. Gordon Brown
wrote an article in The Observer newspaper calling for a more responsible banking system that made
loans on prudent and careful terms.

Lord Myners is the UK's Banking Minister.

LORD MYNERS: We have learnt some very, very expensive lessons globally, about reckless, feckless,
witless lending by a small number of banks.

EMMA ALBERICI: The Chancellor Alistair Darling has asked the financial services authority to look
at ways of controlling excessive lending.

ALISTAIR DARLING: I completely have severe doubts about, you know, the 100 per cent plus loans that
were made available.

I really think that in this day and age that is ridiculous.

EMMA ALBERICI: Bernard Clarke of the UK's Council of Mortgage Lenders says it would be wrong to
introduce legislation forcing people to save for a deposit.

BERNARD CLARKE: We don't think that it would necessarily be the right thing to do in every
circumstance. You can see circumstances even at the moment where a borrower may want to move maybe
a negative equity, and they need to move home, maybe in negative equity, but they may be perfectly
capable of sustaining their mortgage payments over the foreseeable future and remaining in their
job.

So we favour a generally more flexible approach rather than hard and fast rules that outlaw certain
types of products.

EMMA ALBERICI: In an effort to breathe life into the banking sector, the Government has announced
that Northern Rock, the banks it nationalised, will provide ?14-billion or $31-billion over the
next two years in new loans, for up to 90 per cent of the value of homes.

Polly Toynbee is a columnist with The Guardian, in a piece published in the newspaper overnight she
has states that the Government has become as addicted to the house price drug as homeowners.

The only way to stop the bubble reflating she said, is to tax the gains made on people's principal
place of residence.

Like Australia, that profit in the UK is about the only style of investment return that remains tax
free.

POLLY TOYNBEE: In future capital gain should be taxed and people will know they're going to be
taxed, and it will make them just a little bit less excited.

EMMA ALBERICI: Have you had any reaction from the Government?

POLLY TOYNBEE: I've talked to politicians of all three parties who've all said, well of course
you're right, but it would be absolute and (inaudible) political death.

But I think now is the time for politicians to start telling the truth and saying look this was
part of the problem of the whole financial system nearly brought to its knees.

EMMA ALBERICI: The Prime Minister's tough talk on the 100 per cent mortgage rings hollow for many
commentators, given that the Government recently introduced a scheme that offers first time buyers
an interest free five year loan for up to 30 per cent of the value of a new home, with the other 70
per cent coming from a conventional mortgage lender.

ELEANOR HALL: Europe correspondent Emma Alberici.