At last Fionnuala Earley from Nationwide has confirmed what I said back in April 2008 here.
She has drawn the 'Treating Customers Fairly' joker.
Lending has been restricted over the last year, but not because of a lack of credit to lend. It has been restricted because lenders are fearful of being hung out to dry under TCF. They have lent too much to borrowers and now that house prices are falling are trying to reign that back in.
Watch her here
This is what I said back in April
4 - TCF or Treating Customers Fairly. TCF is a key principle and a practice any business should follow. However in the last year the regulator has majored on this as part of it's principles based regime. Basically TCF can be used to say to any mortgage adviser or lender - 'You have not treated your customer fairly by allowing such borrowing. You should compensate your customer' all done with hindsight. TCF is basically a principle that can be used to solve any of the regulator's problems, when they get around to noticing the problems.
So the withdrawal of 100% mortgages and the tightening of credit criteria is not to do with the credit crunch, but more to do with TCF in a falling housing market. Lenders know that they have lent too much money on a falling asset without checking incomes and are fearful of being hung out to dry.
We have now got to a point where it does not matter how much money is put into the market, the credit tightening will not relax.
And let us not forget that most of the credit tightening is only tightening the relaxed credit conditions of the last 6 years.