“We will deliver a clear message on prospects for the UK mortgage market and options for policy-makers when we present evidence to the Treasury select committee’s inquiry into the banking crisis,” said the CML in it’s latest News & Views.”Continuing constraints on funding and a sharply diminished consumer appetite for borrowing mean that there will be no return in the foreseeable future to the levels of new lending and transactions that we saw in 2007.”
With a reduced number of lenders active in the market and less funding available from fewer sources, mortgages were rationed in 2008. The CML believes that is set to continue this year. “Indeed, we expect net lending in 2009 to be negative, and gross lending to be less than half the amount advanced two years ago.”
Meanwhile, the government has not been clear about its key priority for the future, calling on banks and building societies to deliver a conflicting series of outcomes for different groups of consumers.
“If the government wants to keep in check the 75,000 cases of possession expected this year, it needs to adopt a much more ambitious package of measures to support home-owners and address the worsening environment. Borrowers need better state support and bolder mortgage rescue measures to counter the effects of what is expected to be a deep recession.
“We also believe the government urgently needs to review the cumulative effect of its re-capitalisation process on the willingness and capacity of large lenders to provide mortgage funding.
“The way in which Bradford & Bingley and others have been bailed out has affected the capacity of other deposit-takers, particularly building societies, to provide new lending.
“Meanwhile, the deliberate exclusion of wholesale-funded lenders from the Bank of England’s special liquidity scheme and other measures designed to help banks and large building societies has cut off a number of organisations that might otherwise now be helping to provide mortgage funding.
“Further government measures are needed if we are to encourage new lending by a wide range of institutions, including large and small banks, building societies and specialist lenders.”
