Knight says the report could be the catalyst to bring in new mortgage investment in 2009.
He says: “If you tell the investor that the Government will step in, they will see Government-backed bonds with excellent yields and that might attract new types of investor. Pension funds and life insurance funds might be interested, with high returns and a liquid market. It will certainly attract previous buyers of mortgage-backed assets. By next summer, the idea of buying post-crunch assets at a return of 10 times what they enjoyed pre-crunch will be very enticing.”
But Knight says there are several hurdles to overcome if the plan is to succeed, such as getting the support of the Bank of England and European Commission approval.