It includes many of the proposals which we have suggested would be necessary following the credit crunch which began to hit in autumn 2007. The conditions and level of fees imposed on lenders who wish to use the new measures will be particularly important in determining their effectiveness.
The CML has been asking for more than a year for measures to support investor confidence in mortgage-backed securities, so the guarantee scheme for asset-backed securities announced today is particularly welcome. It should help to restart the securitisation market, although at a detailed level the scheme may still be too tightly drawn, appearing to be restricted to AAA-rated securities, and excluding non-deposit-taker lenders. The extension to the discount window facility is helpful too, and should help to offset the potential problems that would otherwise have emerged from the ending of the Special Liquidity Scheme.
The CML also welcomes the announcement of changes to the Northern Rock strategy relating to the repayment of its obligations to Government, which will have the effect of reducing the negative impact caused on the mortgage market by the shrinkage of Northern Rock's mortgage book. This should mean that more of the funding that is available may go towards home purchases rather than remortgaging, which would help to support wider activity in the market.
The CML also notes the FSA's statement clarifying its approach to regulatory capital, and will consider this in more detail in terms of its likely impact on the mortgage market, the scope of lending in 2009 and our forecasts for short term activity.
Michael Coogan, CML Director General, commented: "At long last, the Government has announced a comprehensive and co-ordinated package of measures sufficiently large in scale to have an impact on improving the flow of new lending.
"As always, the devil will be in the detail and there will be a great deal to work through. No doubt, there may still be disproportionate impacts on some firms or some sectors from the latest measures, but overall this is a helpful package that we think is much more likely to help lending flow more effectively again than the steps that have been taken to date.
"It is too soon to assess what impact these interventions may have on lending levels in 2009, but they should be helpful."
