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CML welcomes government action

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Wednesday, 08, Oct 2008 12:00

The Council of Mortgage Lenders welcomes the measures announced today by the Government, following consultation with the Bank of England and the FSA, to strengthen the capital position of banks and building societies, and to help re-open the market for medium term funding by providing guarantees of new debt issuance by eligible institutions.

The CML believes the steps address both relevant issues – funding and capital – and provide both the short-term framework to enable banks to raise finance, and the longer term strengthening of their capital position that should help to re-instil confidence and stability. It should also help to underpin consumer confidence that the tripartite authorities will actively manage the problems of the current downturn in the economy.

The fact that both banks and building societies are eligible is also welcome. However, specialist lenders appear ineligible, so this scheme does nothing specifically to help them, other than through the indirect effect that improved confidence should create for the wider market.

The Treasury specifically refers to the caveat that will apply if the Government provides capital to institutions that it “will require a full commitment to support lending small businesses and home buyers”. No further detail is yet available.

CML Director General Michael Coogan comments:

“From what we can see so far, this seems to be a decisive, coordinated and reasonable package of measures that address both the relevant factors necessary to support a return to market stability. The flow of funding to support mortgage lending has been severely constrained, and these measures will help to create more positive conditions for the mortgage market.”

NOTES TO EDITORS

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.74 million mortgages in the UK, with loans worth over £1.2 trillion.

2. The Treasury press release detailing the government package is here

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