The industry is increasingly concerned that King’s comments will be used as an excuse by the Government to do nothing more to help the industry.
At the Bank of England’s inflation report last week, King strongly attacked proposals from Sir James Crosby to inject further liquidity into the market, suggesting liquidity and funding were separate issues.
Imla executive director Peter Williams says he was “surprised and annoyed” by King’s views. He says: “King was being mischievous, separating liquidity and funding, as I think these things are intertwined. He was overstating the issue, sending a strong message to the Treasury that they should not and could not do anything in the pre-Budget report.
“We are not at all confident of the Government taking up Crosby’s ideas now. The plans need to be tried and we think they will work.”
Cicero Consulting is trying to raise £100,000 to research the possible effects of the Government not helping out the credit markets. Non-executive chairman Stephen Knight says the study is all the more important given King’s attack and believes it will make politicians sit up and take note. A similar Cicero study into Hips influenced a Government U-turn.
He says: “We cannot rely on the Crosby review. Thanks to all the divisions coming out, the lending industry is like a rabbit caught in the headlights. The study will get things moving again and engage politicians and the industry in a much needed debate.”
Knight says this may lead to securitised lenders offering concessions on repossessions to secure Treasury backing.
John Charcol senior technical manager Ray Boulger says: “We are soon going to find there will not be enough mortgages to satisfy demand and at that point it will become political. We will then see a battle between the Treasury and the BoE develop because I doubt that King will be swayed. Just as the Government ignored the home information pack advice, they may well choose to ignore the governor’s advice as well.”