Mortgage Crisis Set To Last Until 2010
A report by Sir James Crosby, former chairman of HBOS into the state of the UK mortgage market found that there will be no quick fix to the current shortage of mortgages in the UK. The problem is related to the market for mortgage backed securities. Between 2001 and 2007, the total of secured mortgage lending rose from £13bn to £257bn. Since the credit crunch began last summer this source of funding has dried up. Lenders don’t want to risk lending secured mortgage funds in an era of declining prices and general difficulties in the mortgage sector.
Sir James gave little relief to the beleaguered government. He warned that the shortage of mortgage funds would not be solved soon. He also warned that government intervention to boost the mortgage sector was unlikely to help. He recommended leaving it to the market to come up with a workable solution. However, he did hint that banks might be able to swap new mortgage debt for government securities - a measure that may help increase the number of new mortgages.
This is at a time when falling house prices are causing increasing calls for government intervention to help first time buyers get a mortgage. The volume of mortgage lending has plummeted 70% in the past 12 months.
Original post by Tejvan R Pettinger