Professor Philip Lane:

I recognise that category. This is why when the rules were designed, the negative equity situation was excluded. People might have crawled into positive equity recently and this is why we allow a significant fraction of loans for non first-time buyers to be outside the loan-to-value ceiling. Without that category, which comprises those who were hardest hit by the crisis, I would probably pick a tighter rule. The fact that we have these allowances to be exceeded is a recognition of that category of homeowner who through no fault of their own were caught by the crisis. That is why the system of allowances is in place for the second and subsequent buyer population. It is in recognition of the many cases such as the Deputy outlined. In some of the other correspondence we have had, it comes back to the same answer. We recognise that one size does not fit all. This is why these rules have exceptions to allow the banks to exercise discretion when they have clear reasons to do so.