View more on these topics

CML doubts lenders can repay Govt support in planned timeframe

The Council of Mortgage Lenders has argued it is “very unlikely” that lenders will be able to repay Government support within the planned timescales, even if wholesale markets return to normal.

In a report on the future of mortgage funding, the CML warns that “even with wholesale markets functioning again, it is very unlikely that lenders will be able to repay Government funds in full on the current timetable of the special liquidity scheme and credit guarantee scheme”.

The CML says this suggests “an extension of the period of Government support will be required” and warns that with the SLS and CGS both drawing to a close by 2014 there is a “major uncertainty” hanging over the future of mortgage market and how lenders can plug a £300bn funding gap.

The CML also warns of a distortion caused by Government support on retail deposits and unsecured bonds from banks and larger building societies, which may lead bondholders to believe they do not need to understand the risks of their investments because it is underwritten by the Government.

The CML warns this is creating a moral hazard.

It says the Government has not given similar support to residential mortgage backed securities or covered bonds, which is needed for competition to return to the mortgage market.

In a separate paper responding to the mortgage market review, also published today, the CML warns the FSA not to become a “price regulator” in its work on unfair charges, arguing that firms are not trying to exploit customers through profiteering.

Recommended

34

FSA fines IFA firm £49,000

The FSA has levied fines totaling £49,000 on a Derbyshire-based financial advice firm, Sett Valley Insurance Services, and its two partners for failures in its sales and advice processes. The failings at Sett Valley were initially identified during an FSA visit focused on the fair treatment of customers, as part of its assessment programme for […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. I had to smile with irony at the CML, “CML warns this is creating a moral hazard.” Was it not the moral hazard that got us all in this mess in the first place…

    So with a £60 Billion Government/Civil Service workers pension shortfall, CGT probably going from 10%, not so long ago, to between 30-40% combined with the massive bank debt funded and to be repaid by the tax payers.

    UK plc is seriously on the back foot and any Gvt may not be able to can make the other important moves like make contributions into pensions mandatory as in Australia… Why did they not do this in the boom years. So people will be taxed, in fact have already been highly tax, but this will be like never before so any chance of proper funding for retirement is on the back burner. Roll this forward 20-30 years and what a legacy for our children…

    Many will emigrate taking much needed skills, resource and wealth. When major change happens it’s never that obvious until we look at the signs with hindsight. I would think this is one of the moments that the full extent of the problem is not obvious to many and more importantly the longer term affect.

Leave a comment