Mortgage market will be "back in action" by 2011

04 March 2009 / by Rachel Mason
The "securitisation and whole loan sale markets for prime mortgages will be back in action by 2011" - that is the opinion of 75 per cent of intermediary lenders.

According to the latest research by the Intermediary Mortgage Lenders Association (IMLA), three quarters of its members think the mortgage market will start to return to normal in two years time.

And, 73 per cent say that the British economy as a whole will start to strengthen in 2010.

The research also revealed that intermediary lenders expect Libor (the rate at which banks lend to each other) spreads to narrow over the coming year. Currently, the three-month Libor hovers at about one per cent above Bank base rate, but IMLA members expect that to reduce to around 0.75 per cent by the end of the year.

This, says the IMLA, suggests that confidence is starting to pick up among mortgage lenders, because although the predicted spread is still significantly wider than the historical average of between 0.25 and 0.30 per cent, it is still significantly narrower than it has been recently.

"It might feel as though the past eighteen months have been a mortgage apocalypse, but this research shows there's hope," said Peter Williams, executive director of the IMLA.

"The securitisation funding model is basically sound, and I think it's realistic to expect activity to resume gradually when industry reforms and the government asset guarantee scheme is finally up and running."

Mr Williams says that the Government scheme will hopefully encourage liquidity back into the securitisation and wholesale markets, and that with more money available banks should start to re-open warehousing facilities to non-bank lenders. This, he says, will allow specialist lenders to get back in the market, and spread the pressure of UK residential lending among a larger number of players.

"Once lenders unshackle themselves from so-called "toxic debt", the wholesale money markets should be much more transparent, giving lenders the confidence to lend to one another again," he said.

"Reactivation of the securitisation market would boost mortgage lending and all lenders' capacity to provide credit. It's the vital next step - the Government must push through the asset guarantee scheme as quickly as possible."

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