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Professional bodies call for urgent action over mortgages required than presented. The Home Builders Federation (HBF) is disappointed that Sir James Crosby has not recommended urgent action to free up the supply of mortgage finance, despite acknowledging the significant risks current market conditions pose to the wider economy. Indeed, without action, he foresees mortgage shortages persisting into 2009 and 2010.
The HBF said that any delays in implementing the recommendations presented in the review will prolong the frustration of those having difficulty securing mortgages.
John Stewart, Director of Economic Affairs at HBF said that first time buyers in particular would be affected. Commenting on the timeline expected regarding implementation he said, "the benefits of action will not be realised until Spring 2009 at the earliest - seven or eight months from now. This is too big a price to pay as in the meantime steeply falling housing transactions, weakening house prices and sharply lower house building activity risk damaging Britain’s wider economy.”
The HBF is the principal representative body for private sector home builders and voice of the home building industry in England and Wales. The HBF’s 300 member firms account for some 80% of all new homes built in England and Wales in any one year, and include companies of all sizes, ranging from multi-national, household names through regionally based businesses to small local companies.
CML joins chorus for immediate action The CML joined the HBF in urging immediate implementation of the Crosby reports findings saying action must be taken now on measures to address the mortgage funding gap, whether through the industry’s suggestion of a market-led solution to incentivise investors via a repo facility, or through other mechanisms as outlined in the report.
If proposals are implemented in the autumn, it will be more than a year after the first effects of the credit crunch took hold: more than enough time to recognise that the markets are not showing signs of self-correcting over a reasonable time horizon.
Yesterday CML director general Michael Coogan commented that, "the mortgage market remains severely constrained. In aggregate, lenders are unable to meet the consumer demand for mortgages because there is not enough funding available to them. Without action, the situation in the housing market will be worse than it needs to be. The housing correction will overshoot, and the knock-on effects on the wider economy will be significant. Government not likely to have the answer - only the market can sort it out An editorial on the Financial Times website today suggested that there is in fact no easy way out of the current situation and hence giving a sobering rebuke to calls for quick action.
The Financial Times said the government could step in and offer guarantees or cheap finance but it would be a mistake. House prices need to fall back to an equilibrium, financial markets need to price in sensible risk premiums, and the economy needs to adjust. Any scheme to keep house prices pumped up – and to encourage first-time buyers to pay inflated prices – would be irresponsible. It would merely deepen and delay the pain.
The final years of the housing boom were financed by money market funds and structured finance vehicles, many from outside the UK, which bought securitised mortgages from British banks. Last summer they stopped doing so. Banks’ only replacement source of finance is retail deposits, but they cost more, and fewer are available.
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