Proposed in an attempt to quell growing unrest in the housing sector and to bring about increased market stability to financial services, the Chancellor of the Exchequer, Alistair Darling, suggested that ‘kite marking’ products would help to instil and improve confidence.
However, a number of industry commentators have suggested that the move will have the opposite effect and do more harm than good.
One broker, who wished to remain anonymous, commented: “Giving a standard or seals to mortgages won’t help, and could push the market back. If there is a ratings system then there will be ‘good books’ and ‘bad books.’ I can see this leading to exclusion, which the Financial Services Authority initially stated was its intention to eliminate from the market.”
Ross Bowen, managing director at Connells Survey & Valuation, added that the move could further alienate aspiring first-time buyers (FTBs).
He said: “We are starting to see the government trying to take some positive action in an attempt to rebuild confidence in the securitisation market. However, the detail and implementation of this gold standard is critical. Many borrowers in the non-conforming sector with high loan-to-value (LTV) mortgages could suffer higher costs and tightened criteria.
"FTBs often have high LTVs despite being likely to keep up their repayments. If all non-conforming mortgages are branded high risk without flexibility, Darling runs the risk of putting FTBs out in the cold.”
However, Alex Hammond, PR manager at Kensington, admitted that the move could help to improve investor confidence. He explained: “We are currently in a situation where there is strong and growing demand from consumers for specialist mortgages, but the funding environment means there is limited supply and any initiative that improves confidence among funders can only be a good thing for the industry, and ultimately for borrowers.
“Of course, going forward we will see a flight to quality from funders who will look to experienced lenders that have demonstrated the ability to build robust, profitable and sustainable mortgage portfolios throughout different economic cycles.”
