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AMI proposes market looks to Sovereign Wealth Funds

The Association of Mortgage Intermediaries believes the mortgage market should look closer at new areas of funding such as Sovereign Wealth Funds.

In its white paper on credit crunch solutions for the mortgage industry, director general Chris Cummings says the Department for Business, Enterprise and Regulatory Reform must help secure confidence in these funds.

The white paper also states that the Bank of England must finance extra liquidity with a long term focus. It says that a one to two year timescale is insufficient as the industry needs a long term solution.

AMI adds that the industry should look to re-engage with those who historically used to purchase MBS such as Pension funds and Life Offices.

Cummings says: “This white paper sets out a series of possible steps towards addressing the current market issues. AMI has always seen its role as coming up with solutions to problems, and by proposing policy, helping those who must make difficult policy decisions. The alternatives set out in this paper are “green shoots” – we want to build a coalition of the willing across industry, regulation and public policy to nurture them into “sturdy oaks”.

He adds: “It is essential that the market comes together in order to find a solution. To that end we propose a joint approach be made to a carefully vetted selection of Sovereign Wealth Funds with the idea of attracting investment in the UK mortgage market. The group making this approach should be facilitated by The Department for Business, Enterprise and Regulatory Reform, to help secure confidence in Sovereign Wealth Funds.

AMI is also calling for the Government’s Mortgage Finance Taskforce to work with the industry on a “rapid” creation of a new gold standard for mortgage backed securities.

The trade body believes that establishing this on a given date would enable certainty within the market and an ability to re-price lenders’ back books.

It suggests that assets which could not be traded should be managed by the National Debt Office or the BofE.

Cummings adds: “At this time it is important that the regulator stops deterring the purchase of MBS and those who once viewed MBS as part of the investment strategy, should revisit this market with a view to re-entering.

“We strongly feel that that mortgage market has passed the stage where it is able to heal itself and find a resolution to the current crisis that is why we have taken the decision to publish a White Paper calling for outside intervention. If the market carries on as it is, consumers will continue to suffer as the availability of suitable products will begin to dry up and the industry will continue to shed jobs at an increasing rate. This will open up the potential for a shortage of qualified advisers, at a point in time when they are most needed.

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