As the Treasury prepares to launch a report by Sir James Crosby (the Crosby Review) into ways of revitalising the UK mortgage market, news from the International Monetary Fund (IMF) suggests that the credit crisis is far from over.
Mortgage rates from several leading lenders have been dropping of late, raising hopes for the future of the mortgage
market. However, the IMF's latest global financial stability report suggests otherwise, speaking of the US mortgage market that has hit the UK hard, Jaime Caruana, counsellor and director of the IMF's Monetary and Capital Markets Development, said:
"A bottom for the housing market in the United States is not yet visible and the credit deterioration is spreading to even prime mortgage loans. Housing prices are softening in a number of European economies, prompting concerns over future loan losses in the mortgage, construction and commercial property sectors in those countries."
The UK is one such country and the Treasury
has recognised this with the launch of its Crosby Review that is expected to analyse the current UK mortgage market and look at ways of reviving it, including the possibility of US style Government backed agencies like Fannie Mae and Freddie Mac, both of which recently experienced financial difficulty.
Other suggestions expected in Sir James Crosby's review include the extension of support from the Government in the form of its £50billion Special Liquidity Scheme. However, such a bail out could end up hitting the tax payer as newer mortgages written at the height of the boom last spring are at a much higher risk of losing as borrowers fail to pay up.
Meanwhile, consumer confidence is low; moneysupermarket.com has found that more that a third of Brits think they will never be homeowners as the spiralling cost of living prices them out of the mortgage market.
Louise Cuming, head of mortgages at moneysupermarket.com, said: "It is deeply concerning so many people feel they will never be able to buy a house. Owning your first property used to be a rite of passage, but nowadays the challenge is to save enough to cover the deposit, stamp duty and fees not to mention the worry of affording the mortgage. It is no wonder owning your own home seems to be a fading dream."
Speaking of the Crosby Review, due for release today, she said: "With Sir James Crosby reporting on how to stimulate the mortgage market, our research is a stark reminder of the effect of rising inflation and of the difficulties getting a mortgage.
"For home ownership to be ruled out by so many people has dire consequences for the property market. We need to see first-time buyers returning, so we await Sir James's final report with bated breath," she concluded.
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