CML announces plans to kick-start mortgage market

Permalink: CML announces plans to kick-start mortgage market
by Kay Murchie

The housing market is suffering currently due to falling house prices while the current squeeze on mortgage lending is also having a devastating affect.

In a bid to kick-start the mortgage market, the Council of Mortgage Lenders (CML) has announced plans which include UK banks and building societies to offer new mortgages.

Furthermore, it wants the Bank of England to guarantee a market in mortgage-backed securities and covered bonds.

As a result, funds would be pushed back into mortgage lending by encouraging investors to buy mortgage-backed securities.

The mortgage market is suffering due to a shortage of available funding to support new mortgage lending. This has resulted in the amount of mortgage deals on the market diminishing and the cost of these types of loans rising.

Back in April, the Bank of England launched the Special Liquidity Scheme which was designed to improve the liquidity position of the banking system and raise confidence in financial markets.

However, the CML recently said the benefits of the scheme have yet to be felt by lenders.

According to the CML, the new scheme would be quick and easy to set up and would restore confidence back into the market.

The plan will no doubt be good news for first-time buyers who are desperate to get onto the property ladder as house prices continue to fall but are unable to secure a mortgage.

Earlier this week, the Government said it was considering cutting stamp duty in a bid to kick-start the property market.

According to many experts, stamp duty is one of the major factors that is discouraging buyers from the market.

However, according to Ministers, changes to stamp duty would only make a difference if they were accompanied by further efforts to increase the supply of mortgages.