Government ministers and mortgage industry representatives met yesterday at 11 Downing Street to discuss mortgage rates, inter-bank lending, repossession rates and the Bank of England's special liquidity scheme.
Chancellor Alistair Darling was joined by chief secretary to the Treasury, Yvette Cooper and housing minister, Caroline Flint, as he spoke with various mortgage
lenders and associations. The meeting follows an announcement from the Bank of England on Monday that it will make £50 billion of Government bonds available to lenders in exchange for less secure mortgage assets.
"The mortgage market is facing challenges as a result of the US sub-prime crisis." said Mr Darling. "The Government is taking coordinated action, internationally on regulation, in the London markets through the action of the Bank of England, and also today with the CML and the FLA, to ensure a fair and well functioning UK mortgage market.
"I welcome the arrangements that the industry has in place, and will continue to build upon, to address the concerns of borrowers in difficulty. I hope that lenders continue to take their responsibilities towards customers seriously."
Ms Flint appealed for mortgage providers' cooperation, emphasising the plight of those applying for a home loan. "We know that some prospective borrowers are facing difficulties at the moment because of the global supply of credit." she said. "We want to ensure there continues to be stability and fairness in the housing market, and that the support is in place for consumers who may need it right now."
One positive outcome of the meeting was that mortgage providers
agreed to treat homeowners fairly and only to enforce repossessions as a last resort. Many lenders welcomed the Bank of England scheme, which should increase liquidity in the mortgage markets and encourage banks and building societies to lend to each other more freely.
According to the Council of Mortgage Lenders (CML), it was agreed that the move will help stabilise and boost confidence in the financial markets. Director general, Michael Coogan, said: "We welcomed the chance today to discuss the steps that the industry is taking to support borrowers in the market, and look forward to continuing to work closely with the Government over the coming months to ensure that as few borrowers as possible face the threat of repossession.
"Early contact with the lender before a payment is missed should ensure the widest range of options is available so customers can help themselves to avoid payment shock."
However, Mr Coogan said that relief will not be immediate. The "Bank's actions should ease funding conditions for mortgage lenders over time", he said. Other providers said that the Bank would need to free up billions more in order to shore up funding within the mortgage markets, and that mortgage rates
are more likely to rise than fall in the near future.