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tuggybear

No Silver Bullet For Mortgages, Uk Is Warned

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The British government was told yesterday that there was no quick solution for the country's mortgage crisis and that the long-term funding of mortgages should be left to the market.

A report commissioned by Alistair Darling, chancellor, from Sir James Crosby, former chairman of HBOS, the bank, said there was no silver bullet that would revive the wholesale mortgage market, reduce borrowing costs and take the pressure off the housing market.

In an interim report produced with the Treasury, Sir James says there is no doubt that UK lenders have become reliant on wholesale funding markets for the expansion of mortgage lending. But these markets have, in effect, closed, meaning lenders are likely to be short of cash in 2008, 2009 and 2010.

Between 2000 and 2007, the total amount of mortgage-backed securities outstanding rose from £13bn to £257bn ($25.7bn to $509bn), making a significant contribution to the £1,200bn of total outstanding mortgage lending.

But almost no new issues have been sold this year of either residential mortgage-backed securities - groups of mortgage assets parcelled up into bonds of varying risk and return - or covered bonds, pools of mortgages backed both by the under-lying mortgage assets and the issuers' solvency.

Investors have lost confidence in such securities because they lack transparency; they entail conflicts of interest in the origination of mortgages and from credit rating agencies; there are worries about poor-quality assets underpinning them; and they were illiquid when times got tough.

Sir James and the Treasury recognise there is no merit in trying to reopen the market in its previous form. The main hope is that the industry comes up with "a stronger and more efficient market", probably with standard products and more likely to be in covered bonds than mortgage-backed securities, since these give greater investor protection.

"Market-led initiatives are unlikely to help resuscitate markets quickly," the report states.

It also looks at proposals for government help, either extending the Bank of England's special liquidity scheme or providing a -government guarantee on the securities.

However, looking forward to his final report, Sir James warns that "I may yet -recommend that the government should not intervene in the market, on the grounds that such intervention would create more problems than it would solve".

Link : http://www.ft.com/cms/s/0/ddf926ba-5dce-11...0077b07658.html

Finally a government sponsored report that will (hopefully) recommends conclusion that is in UK's long term interests, not political.

Although Alistair Darling does not have to follow any recommendations.

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Finally a government sponsored report that will (hopefully) recommends conclusion that is in UK's long term interests, not political.

Although Alistair Darling does not have to follow any recommendations.

Given the state of public finances at the moment, and the situation with inflation, I suspect the residents of numbers 10 and 11 would actually be pretty relieved to receive a recommendation to do nothing. Not only does it mean they can just blame "the market", but it would also give them something to wallop the Tories with if they try and pull off some sort of "rescue". That said, I can imagine who gets to asked the question about in post-election PMQs causing a bit of split in the Labour party, as both of the PMs will want to do it.

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Sir James Crosby, former chairman of HBOS

I think you'll find that he will eventually come down on the side of giving the banks lots of money. After all there are worse things than people losing their jobs and homes- for example a banker could actualy lose money, shocking idea I know , but a remote possibility- unless they receive taxpayers money asap.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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