Mortgage Loan Industry Calls For Government Action
Following the credit crunch, banks and building societies are facing increasing difficulties being able to provide loans and mortgages for individuals due to a lack of available funds in the wholesale money market.
Earlier this year the Bank of England injected £50 billion into the banking sector, under its special liquidity scheme, in order to try and revitalise the home loan industry and ease the strain on lenders. However this level of funding has not been sufficient, according to an interim report from Sir James Crosby, deputy chairman of the Financial Services Authority (FSA).
In the report, Sir Crosby claims that action needs to be taken urgently to restore some suitable level of liquidity within the mortgage loan industry if we are to avoid the current problems becoming far worse and the housing market slump deepening further than it already has done, due to a lack of funding and he has suggested an extension to the Bank of England’s special liquidity scheme, along with other plans, to boost the home loan market.
As new lending figures for the month of June show that the level of new loans has dropped to an all time low, experts within the mortgage industry have called on the Government to act sooner rather than later, once the full report has been published later this summer.
Industry experts have welcomed the news, but have reinforced the fact that positive action needs to be taken. Michael Coogan from the Council of Mortgage Lenders (CML) said “Today’s analysis sets down an independent market that intervention to address the mortgage funding gap is both appropriate and necessary.” He added “Without action, the situation in the housing market will be worse than it needs to be. The housing correction will overshoot and the knock-on effects on the wider economy will be significant.”
Chris Cummings of the Association of Mortgage Intermediaries (AMI) claimed that the recommendations should have gone further. He said “As the situation worsens, we will see arrears and repossessions increase. To deliver a stable mortgage market, it is now time for decisive leadership from the Treasury.”
