At a time when the industry most needs help from the Government, Chancellor Alistair Darling’s first Budget offered the industry very little.
All the pre-talk about a gold standard kitemark for mortgage-backed securities was quietly forgotten by the Government – a move which will be welcomed by many in the industry.
The Budget saw the Government once again praise the idea of long-term fixed rates – the same way it has been doing for the last four years.
If the industry expected the Government to actually come up with some plans then it was let down. What did it announce instead? That it would be launching another review, following its most recent review and the Miles review before that.
And what was the ‘breathtaking’ conclusion of the Government’s Housing
Finance Review, published this Wednesday with the Budget?
Darling revealed that long-term fixed rate mortgages can reduce some of the risks of taking out a mortgage, especially for first-time buyers and lower income families. Yes, really.
The Government will now consult the industry’s views on how it can bolster the long-term fixed rate mortgage market and will then, over six months later, report back in the pre-Budget report.
Even more worryingly, the Government did not include any solutions or proposals to what can be done to help the liquidity crunch the mortgage market is currently suffering.
Instead, it proposed in this week’s Budget that it would be creating a working group to improve liquidity. This working group will be industry-led and include the investment industry, mortgage industry, the FSA and the Treasury.
But once again the UK government has failed to show any understanding of how serious the situation is, emphasised through its lack of any urgency with these proposals.
Darling said that the working group will report back to him by the Summer and then the proposals will be presented at the pre-Budget report.
Mortgage commentators have hit out at this proposal, branding it too little, too late.
Edeus managing director Alan Cleary says: “It would be at least a year before any resulting measures were implemented. The Government would be far better placed to investigate how to alleviate the stigma associated with utilising Government auction funds in the here and the now so that confidence and liquidity can begin to be bought back to the market.”
Nationwide non-retail executive director Matthew Wyles adds: “This is too little, too late. When you look at what the Fed and the ECB have given their respective banking systems with huge injections of liquidity, our Chancellor’s idea of a response is to set up a working party which will report back in six to nine months. He is like a rabbit in the headlights.”
The crisis that has rocked the UK mortgage market over the last seven months needs to be sorted out now before it spirals into as serious problem as the US is currently suffering. Action is clearly required now, not in six months time. It is about time the Government woke up to this.