Peter Bolton King, chief executive, NAEA, commented: "It should certainly come as a great boost to consumer confidence to hear this news from the Bank of England. There has been much 'doom and gloom' reported over the past few months, especially with regards to the global credit crunch. However, to hear that there is light at the end of the tunnel should come as a massive boost to consumer confidence and is the crutch that both consumers and organisations very much need.
"As an Association, we have always been keen to stress that what the market place is experiencing at present is not anywhere near the difficulties seen in the late 1980s/early 1990s and it is encouraging to see this fact advocated in the report.
"However, in order for consumer confidence to be nurtured over the coming months it is critical for the Bank of England to further reduce interest rates in order to help bolster consumer confidence even further.
"It remains paramount that the shackles currently around the mortgage market are loosened and it is imperitative that the lendors pass on these interest rate reductions to consumers to help lighten the load."
The Association of Finance Brokers (AFB) has responded by calling on lenders to reappraise their current positions and start lending to each other to unblock the market in order that consumers may benefit from improved access to credit. AFB believes it is crucial we avoid a situation that could become a self-fulfilling prophecy, with tight credit conditions potentially leading to a pickup in defaults among vulnerable borrowers.
Robert Sinclair, AFB Director, said: "Building on AFB's sister organisation AMI's Solutions to the Credit Crunch White Paper, the Bank of England has identified key actions to rebuild confidence in the market. These include a new scheme aimed at improving the liquidity position of the banking system and frequent and co-ordinated disclosure by banks of positions and losses."
The Bank has also identified that some Mortgage Backed Securities now 'look cheap'. The Bank thinks there will be no defaults of triple A rated securities, making these good investments.
Sinclair added: "Following AMI's White Paper, further meetings are now being held with Bank of England officials and policy makers in order to offer advice and help address the issues in the market. AFB, AMI and AIFA will continue to apply pressure to market participants to achieve the best outcomes for members. We believe that resolving issues in the first-charge securitisation market will result in quicker, positive outcomes for second-charge lenders, and thus AFB members."
Chris Cummings, director general of AMI, commented: "It is AMI's view that the Bank should step in and buy more of these assets, and work with the industry to set a new 'Gold Standard' against which MBS could be re-priced."
