Mortgage News UK Will Not Follow US Into Mortgage Doom Says Darling
14 April 2008 / by Joy Tibbs
Ministers from the G7 nations devised a plan to address the problems in the global financial markets in Washington at the weekend.
A statement released by the leaders after the meeting said: “We remain positive about the long-term resilience of our economies, but near-term global economic prospects have weakened.”
The first step it laid out is to ensure that financial institutions are more open about risk exposure and write-downs in order to increase consumer confidence.
The ministers from Canada, France, Germany, Italy, Japan, the UK and the US also revised their approach to foreign exchange markets following the rapid demise of the dollar. Some experts believe the leaders are considering buying dollars to prevent any further loss of value.
“We are concerned about their possible implications for economic and financial stability,” said the G7 statement. There has been no external intervention in currency markets since the euro was rescued in 2004.
Meanwhile, Gordon Brown and Alistair Darling are focusing on the UK mortgage market. In a speech before the Washington conference, the chancellor pointed out that: “There are a number of key differences between the UK and US housing markets which mean that the UK housing market is unlikely to experience problems in the way that the property market in the US has been affected.”
He said that, in the UK, housing supply has not kept pace with demand, that its sub-prime mortgage sector is much smaller than that in the US and that mortgage lending is stricter in the UK. “Many of the regulatory changes now being suggested there [in the US] in response to the problems in the market are already in place here in Britain,” he explained.
Despite this, both leaders are concerned that UK financial groups are failing to pass rate cuts on to homeowners in line with the Bank of England base rate. The prime minister and chancellor are to host a breakfast meeting with bank representatives and mortgage lenders tomorrow morning to talk about the current financial climate, but relations are already strained.
“Although the Bank of England has cut rates in recent months, the banks have not always been passing those reductions to their customers,” Mr Brown told the News of the World at the weekend.
The Council of Mortgage Lenders has attempted to defend the difficult position of mortgage providers. Chairman Steven Crawshaw said: “Sometimes, lenders are criticised for being too conservative and risk averse, unwilling to lend against perfectly good propositions. Other times we stand accused of being reckless, enticing poor credit risks into unsustainable borrowing,”
He adds that the Bank of England “believes that institutions are hoarding liquidity because they do not trust other banks and so are reluctant to lend to each other. We think that lenders are hoarding liquidity because they’re concerned about whether they will be able to access future funding and are managing pipelines of business very cautiously.”
Those attending the meeting will include executives from Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide and the Royal Bank of Scotland.
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