The Inside Edge
Yesterday (29th July 08) Sir James Crosby published his interim report to the Government: Mortgage Finance: Interim analysis.
He warns that many mortgage intermediataries will be forced out of the market by the current financial situation – further reducing the competiveness and availability of UK mortgages as banks focus on supporting branches over independents.
Key points of the report:
- Shortage of mortgage finance may continue until 2010, however:
‘there is still good availability of finance for those borrowers who offer significant security (i.e. have reliable earnings and seek to borrow 75 per cent or less of the value of their property), the availability of finance to all other consumers is considerably reduced and likely to remain so.’
- The shortage of mortgage finance will take its toll on consumer spending and the housing market. But ‘these markets will recover in time, when they do, however, they are likely to be different in both scale and structure to those of a year ago.’
- Crosby doesn’t believe the answer is to set up a government backed group to buy packaged loans from lenders (as per the historical US model) .
- In his final report Crosby may well recommend that the Government should not intervene in the market, on the grounds that such intervention would create more problems than it would solve – but is evaluating the options.
- The final report is due to be published in at the time of the 2008 pre-budget report in the Autumn.
And some words of reassurance:
‘The long-term fundamentals that underpin the housing market remain,
however, strong. Employment is at a record high; interest rates have been reduced three times since December 2007; and household growth is projected to rise strongly as the population ages and expands and as more people live in single person households, which will support house prices in the long-term.’
To read the interim Crosby report in full click here.