"While the Bank's decision to extend the SLS term for most lenders is to be welcomed, this move does little to improve the current state of liquidity in the mortgage market. Lenders might be able to clear their balance sheets of old debt, but the problem our mortgage market faces is a lack of new debt finance. With such turbulence in the wider market, LIBOR has moved up again, having already reached a seven year high this week. Banks are unable to help themselves in these conditions, and the strength of our economy depends in part on their health. The Bank of England can neither afford to ignore this nor continue to oppose government support, not least with respect to the wider financial stability agenda.
The Special Liquidity Scheme still excludes lenders which do not take deposits, preventing a large proportion of the mortgage market from moving the assets already on their balance sheets. The intermediary sector is responsible for nearly 80% of all new mortgages - it's madness to rule out a large number of intermediary lenders from accessing the Bank's funds when mortgage finance is so tight. Even if the Bank persists in offering no support to lenders making new loans, IMLA would strongly urge the Bank of England to reconsider which lenders the Special Liquidity Scheme is available to in order to create a level playing field."
