Darling takes action to avert mortgage crisis
Chancellor Alistair Darling has launched a work group to explore how the government could improve the functionality of the mortgage crisis in order to avert a lending crisis.
It will draw on the experience and expertise of lenders, investors and the Tripartite Authorities (the treasury; Bank of England [BoE]; and Financial Services Authority [FSA]) in an attempt to mitigate deteriorating market conditions in the UK.
Speaking earlier today, Mr Darling confirmed the group of mortgage industry experts would be led by Sir James Crosby - deputy head of the FSA.
"The recent and ongoing disruption in global financial markets has raised complex issues about the functioning of the mortgage-backed securities markets," explained the chancellor.
"This [taskforce] will be an important contribution to stabilising the cost and supply of UK mortgages."
The establishment of the working group follows the publication of the treasury's Housing Finance Review (HFR) alongside Budget 2008.
Concerns have also been heightening following the recent correction in house prices, with Halifax yesterday reporting a 2.5 per cent drop in average property prices during March.
It was confirmed the working group will consider options for improving the mortgage-backed securities market, including measures aimed at broadening the investor base for mortgage-backed securities and improving the robustness of the market.
The group's first task will be a broad-based assessment of the current state of the mortgage finance market.
Sir James said: "These difficulties stem from problems in the markets, so to be effective any proposals to deal with them must be market-developed and market-led.
"Our job in this group will be to facilitate a discussion between lenders, investors and the authorities with a view to identifying market-led solutions that will work."
CML director general Michael Coogan broadly welcomed the group.
However, he said: "The reality is, however, that confidence in the market for mortgage-backed securities in particular cannot be restored over night.
"Meanwhile, the shortage of funding is creating disruption in mortgage and housing markets now.
"While the working group is developing its proposals, we therefore believe there is a need for more immediate action by the central banks, in particular the Bank of England in the UK, to address market funding problems."
