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Security scheme needs wholesale widening

Mortgage industry pundits have warned more is needed to boost wholesale mortgage markets.

The Government is launching an asset guarantee scheme guaranteeing £50bn of AAA mortgage securities for six months, which contain loans originated after 2008 by banks and building societies up to 90 per cent loan to value. It has a credit guarantee on the issuer’s obligations and a liquidity guarantee for any bonds that have an option where the issuer has to buy back the bond.

Intermediary Mortgage Lenders Association executive director Peter Williams says: “There are a lot of limitations to the scheme but it is a start. Hopefully it will get the market moving and reignite investors’ interests.”

But Homefunding chief executive Tony Ward says: “Investors are not buying mortgage-backed securities because they are illiquid and they can’t be traded.

“It would have been much more useful if the Treasury opened up the discount window facility to non-banks like pension funds. Then they could make money back on any assets they chose to buy.”

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