"The report makes clear that lending standards in the UK have been more rigorous than in the US and the rise in possessions is largely due to a worsening credit environment rather than poor lending. This contrasts with the situation in the USA, where lax lending and plummeting house prices have crippled confidence in RMBS. The BoE report shows that the underlying value in UK mortgage backed securities remains greater than the open market value these assets currently command.
"The securitisation model is down but not out, and there is a real threat that the UK banking system has shied away from it prematurely. It's quite clear that regardless of the virtues of the deposit model it cannot alone underpin the UK mortgage market at sensible levels - the government, FSA and Bank of England must find a solution to the market's aversion to securitisation. The problem in Britain is confidence, not value.
"The report makes no mention of non banks and the contribution they make to the UK mortgage market. The government's liquidity package does nothing to support lenders who don't take deposits and as a result many such lenders are having to wait in the wings while the securitisation markets are closed. The authorities need to recognise the impact that paralysis in the non-bank lending sector is having on overall mortgage lending volumes - and the effect this is having on our housing market. We need more choice in the mortgage market and an increased supply of funds is essential."
