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Mind the mortgage-funding chasm

Friday 29th January 2010

If the financial crisis has achieved anything, it is people telling it like it is in greater numbers. Plenty of people continue to bluff or stick their heads in the sand and certainly, some people are just more inclined to be honest. But these are desperate times for the mortgage industry and clarity and a strategic vision are needed.

The Council of Mortgage Lenders (CML) owes it to its members to fight back anyway but in the post-credit crunch era, as the stakes rise, it continues to impress on the policy front.
The trade body released both its responses to the Mortgage Market Review and its outlook for the mortgage funding markets yesterday afternoon. The CML flags up an almighty GBP 300bn funding gap when additional funds in the form of the Special Liquidity Scheme (SLS) and the Credit Guarantee Scheme run out between 2012 –14.

Without a serious funding plan the mortgage market will shrink to previously unimaginable levels. The CML said unless this is sorted out, there’s little point worrying about how the MMR, effectively, because there won’t be much of a market left to operate.

In his own words, CML director general Michael Coogan:

“The CML believes that any conduct of business reform needs to go hand in hand with a strategic plan to achieve diversified funding for mortgage lenders, of all types.

The FSA’s planned reforms are well intentioned even if their implementation is a source for concern. But there is a real risk that they may be at best irrelevant, or at worst may damage a fragile market at the wrong time, unless they are accompanied by a strategic plan to achieve and sustain stable mortgage funding markets for the future.”

The much-maligned FSA on the other hand is out to prove itself the defender of the disadvantaged consumer and regulation is pretty much its sole battle plan.

But the CML lands a punch on the FSA when it says: “Its past supervisory failures have accentuated recent mortgage market problems.” The trade body went on to welcome the FSA ’s plans to regulate more effectively, but added that this does not have to mean more rules for the mortgage market.

However, a mortgage market steadily cleaving into “haves and have nots” has been with us for a while and that division continues to widen. Figures from Property Portfolio Rescue suggest distressed homeowner enquiries spiked 55 per cent in South East London in January and other estimates suggest 15,000 repossessions on the way in Q1.

So as the FSA forges ahead with its own urgent regulatory agenda intended to protect borrowers most in need, as ever, it’s a complicated picture.

But first things first. Without a competitive mortgage market all UK homeowners will find themselves in difficulties. The CML has warned the government needs to fund and commit to a consultation with industry experts and find a way though the funding crisis. Let’s hope those who gain the government’s ear are also straight-talking with serious ambitions, keen to do a little more than just feather their own nests.

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