There has been a varied response to the release by the Treasury of Sir James Crosby’s interim review of the mortgage finance markets.
The Council of Mortgage Lenders (CML) welcomed the analysis and the recognition that a shortage of mortgage funding will persist for years without intervention.
The CML now urges the Treasury to work with urgency on measures to address the mortgage funding gap, whether through the industry’s suggestion of a market-led solution to incentivise investors via a repo facility, or through other mechanisms as outlined in the report.
If proposals are implemented in the autumn, it will be more than a year after the first effects of the credit crunch took hold: more than enough time to recognise that the markets are not showing signs of self-correcting over a reasonable time horizon.
CML director general Michael Coogan said: “As the Bank of England lending figures show, the mortgage market remains severely constrained. In aggregate, lenders are unable to meet the consumer demand for mortgages because there is not enough funding available to them.
“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.
“Today’s analysis at last sets down an independent welcome marker that intervention to address the mortgage funding gap is both appropriate and necessary. It creates a clear expectation of measures at the time of the pre-Budget report. We now look forward to working urgently with the Treasury over the summer on proposed solutions.”
However, the Home Builders Federation (HBF) is disappointed that Sir James Crosby has not recommended immediate action to free up the supply of mortgage finance, despite acknowledging the significant risks current market conditions pose to the wider economy. HBF Director of Economic Affairs, John Stewart, said: “If the Treasury does not take up any recommendations from Crosby until the Pre-Budget Report in October or November, this will unduly prolong the frustration of those who are currently having difficulty obtaining mortgages.
“The benefits of action will not be realised until Spring 2009 at the earliest - seven or eight months from now. This is too big a price to pay as in the meantime steeply falling housing transactions, weakening house prices and sharply lower house building activity risk damaging Britain’s wider economy.”
