Prospect of 2009 mortgage recovery unlikey
Government claims that mortgage lending will return to 2007 levels next year have been rubbished by the head of the Council of Mortgage Lenders (CML).
Speaking at the trade body’s annual conference, director general Michael Coogan said that official forecasts for the downward trend in mortgage lending to reverse in 2009 are wrong.
And he warned that things are actually likely to get much worse: “Unless the government takes further targeted action to help market participants, we will see a worsening of the picture next year compared to this.”
The CML has, so far, refused to confirm its 2009 lending forecasts as the outlook for funding, interest rates and consumer appetite remain unclear.
“A good outcome next year in my view would be if we had lending at levels seen in 2008, but bearing in mind we will be in a recession this would be a real challenge,” Coogan adds.
Pressure is now on the government to take action to help lenders finance more home loans. Although the Bank of England is expected to cut interest rates for a third month in a row this week, experts have repeatedly argued that monetary policy (such as low interest rates) will not be enough to kick-start the mortgage market.
Coogan says the Bank of England and Financial Services Authority must take “co-ordinated action not piecemeal, self-interested decisions.” For example, widening the central bank’s special liquidity scheme to include non-high street banks and specialist lenders, and to launch guaranteed bonds for help lenders raise funding.
The latter measure would help restore the securitisation market, which allows lenders to sell mortgage debt thereby raising funding for new lending.
Also speaking at the CML conference, John Pain, retail markets managing director at the FSA, admitted the restoration of the securitisation market is unlikely to occur anytime soon.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.