Advisers have backed calls from former monetary policy committee external member Adam Posen to use quantitative easing to fund residential mortgage-backed securities in an effort to boost the housing market.
Speaking to the Treasury select committee this week, Posen said the belief that QE should only be used to buy gilts should change. He claimed he pushed for the Bank of England to buy assets such as corporate debt before he left the MPC in August.
Asked by Conservative MP Andrea Leadsom whether QE could be used to boost the housing market through residential mortgage-backed securities, Posen replied: “Absolutely, I support it. I think that would be a good idea.”
The residential mortgage-backed securitisation market has been depressed since 2007. The lack of investment in RMBS has cut funding lines for lenders and is seen as a key factor holding back gross mortgage lending.
Coreco director Andrew Montlake says: “This shows a different strand of thinking and all ideas like this should be on the table. It would bring benefits to the housing market and could be another useful tool as the benefits of QE as it currently works are under debate.”
Bloomsbury Financial Planning partner Jason Butler says: “It is a plausible variation on the current strategy but it remains to be seen whether it would work.”