Mortgage market confidence to be restored by government Working Group

11 April 2008 / by Joy Tibbs
Deputy chairman of the Financial Services Authority (FSA), Sir James Crosby, is to lead a new government mortgage finance Working Group.

According to Chancellor Alistair Darling, the group – comprising a range of mortgage industry experts – will advise the government on ways of improving the function of mortgage finance markets. It will be influenced by lenders and investors as well as the Treasury, the Bank of England and the FSA.

Mr Darling explains that: "The recent and ongoing disruption in global financial markets has raised complex issues about the functioning of the mortgage-backed securities markets. He adds that the "work will be an important contribution to stabilising the cost and supply of UK mortgages."

And from Sir James' point of view, the group will "Facilitate a discussion between lenders, investors and the authorities with a view to identifying market-led solutions that will work." He says that the current difficulties "stem from problems in the markets, so to be effective any proposals to deal with them must be market-developed and market-led."

The Association of Mortgage Intermediaries (AMI) sees the Working Group as a positive step for the mortgage market. Director general, Chris Cummings, says: "It is vital for consumers that we refresh the sources of funding for the UK mortgage market. Without new initiatives, consumers will find the mortgage market a much tougher place to get a good deal.

"Central to the work of the new group must be the need to bring confidence back into the market. What started out as the credit crunch quickly became about liquidity but is now a confidence crisis. AMI looks forward to working with the group and presenting our ideas for a solution."

Similarly, the Council of Mortgage Lenders (CML) welcomed the decision to establish the group. However, it also urges central banks to take immediate preventative action.

Director general of the CML, Michael Coogan, says: "The working group has been given a broad remit to consider what is needed to restore confidence in mortgage funding markets. Of particular importance is the acknowledgement that the market needs more effective disclosure of the quality of underlying mortgage assets, which in the UK remains good.

"The reality is, however, that confidence in the market for mortgage-backed securities in particular cannot be restored over night. Meanwhile, the shortage of funding is creating disruption in mortgage and housing markets now. While the working group is developing its proposals, we therefore believe there is a need for more immediate action by the central banks, in particular the Bank of England in the UK, to address market funding problems."

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