In his first Budget as Chancellor, Alistair Darling is expected to unveil plans to grade all UK mortgages, with the least risky given an official seal of approval.
The project is designed to re-open the market for wholesale mortgage financing which has been on hold since the credit crunch hit the UK.
Darling will publish plans for a gold standard kitemark for batches of mortgage-backed securities that will comprise loans that meet a high standard of credit quality.
He is due to consult with banks to decide how the kitemark will be set, how mortgages will qualify, and how it will be administered.
It is intended that this initiative will be introduced by Autumn.
However, banks have warned that the move could lead to the creation of a two-tier system with a risk of ‘stigmatising non-conforming mortgages’.
Angela Knight, chief executive of the British Bankers’ Association, admitted that there should be flexibility in the types of mortgages to be included in a gold standard securitisation.
Louise Cuming, head of mortgages at moneysupermarket.com, said: “This is fundamentally flawed. The idea of kitemarking the lowest risk loans is not going to work as this is not the type of mortgage that gets securitised – it will polarise the market even more.
“This is further evidence that the government doesn’t understand our industry.”
