Newsroom

Urgent action needed on mortgages

The BPF has backed calls by mortgage lenders for swift government action to encourage market activity.

Today’s interim report by Sir James Crosby says that “mortgage markets are adjusting to the shortage of funding”, adding that it is “a slow process which will take two or three years to run its course.”

While the BPF has welcomed Crosby’s analysis, it is urging Treasury officials to work with industry representatives and take action sooner rather than later.

The BPF, together with the Council of Mortgage Lenders and ten other organisations, including the RICS and HBF, had last week called for a market-driven solution in the form of a Bank of England ‘repo facility’, which would help to restore market confidence by financing investors through the issuing of bonds.

In an open letter to the government, the bodies outlined how the secure lending facility could use new residential mortgage packaged up as bonds as collateral. To qualify the bonds would first have to be sold to investors in a public issue.

While the Bank would finance investors in the absence of the wholesale lending markets, the risk would still lie with those investors. Therefore, although this solution would deal with the problem of ‘cash’, it would not necessarily restore confidence in lending, as investors and lenders might be unwilling to lend in the face of falling house prices or rising job cuts.

Ian Fletcher, director for residential policy, said:

“The government should leave no stone unturned in seeking solutions to reviving the mortgage market as it is critical not only to lenders and potential borrowers but the wider economy. The Council of Mortgage Lenders has put considerable thought into a potential solution and we support its call for the government to give both serious and rapid consideration to its proposals.”

Read the CML press release: http://www.cml.org.uk/cml/media/press/1788

For more information on the BPF’s position, please contact:

Andrew Teacher
BPF head of media
ateacher@bpf.org.uk
07968 124545.