Mortgage experts believe the coalition Government has changed its stance on wholesale funding, offering hope that it may take steps to resolve the current funding shortfall.
Before the election, the Conservative party pledged in its manifesto to make the mortgage market less dependent on wholesale funding.
It said: “We will reform the regulation and structure of the banking system to ensure lower levels of leverage, less dependence on unstable wholesale funding and greater availability of credit for small and medium-sized enterprises.”
However, a recent Treasury green paper entitled, Financing the Private Sector Recovery, says: “Securitisation can be an important source of funding for both banks and non-bank lenders. The financial crisis indicated significant underlying failings in these markets as previously constituted and underlines the importance of reform to ensure that in the future the securitisation market is a more sustainable and robust market.”
Cicero Consulting director Iain Anderson says: “There is absolutely no doubt that since the election there has been a marked shift in the stance of the coalition from what they were saying before the election which suggested they would not touch wholesale funding with a bargepole.”
Anderson says the change is probably due to the coalition having access to the kind of data that is only available to parties in Government. He adds: “They clearly appreciate the impact on the market of not having a free-flowing wholesale market. There is a recognition in Government of the need to look at mechanisms to bring the market back.”
A Council of Mortgage Lenders spokesman says: “Clearly, we would like to see a return to a robust and secure securitisation market. What is missing is a plan for getting there and, in the meantime, lenders and borrowers are affected by a shortage of mortgage funding.”