Mortgage industry backs Crosby report

25-11-2008

Mortgage industry backs Crosby report
Mortgage experts have backed the Crosby report but are disappointed the government will not look into its recommendations until the spring.

The investigation into the squeeze on credit in the mortgage market by Sir James Crosby, the former chief executive of HBOS, was published yesterday alongside the pre-Budget report.

A key recommendation was government intervention in the market to unfreeze lending and prevent a housing correction from turning into a prolonged fall in house prices.

The report's proposal the government auction off guarantees was welcomed by building societies, surveyors and lenders.

"Ultimately, this move should increase funding available for new borrowers which, in turn, could inject some much-needed activity back into the housing markets," the Royal Institute of Chartered Surveyors (Rics) said.

"Government guarantees of new mortgage securities will help to ease the future funding of mortgage loans," the Building Societies Association (BSA) added.

Mortgage broker John Charcol said not only does this seem like the best option, it would also likely be profitable for the government.

However, experts warned a delay to the plan could be dangerous.

Not only would the scheme need approval from the European Commission under state aid rules, but the chancellor said in his speech yesterday he will not be reporting further on the proposals until next year's Budget.

"Unfortunately, the comments on these proposals made by the chancellor in his pre-Budget report demonstrate he has completely failed to recognise the urgency with which Sir James's principle proposal, i.e. to guarantee the issue of new mortgage backed securities, needs to be implemented," said Ray Boulger, senior technical manager at John Charcol.

The Intermediary Mortgage Lenders Association (IMLA) agreed.

Peter Williams, executive director of IMLA, said: "Though we recognise the need to obtain approval from the European Commission for the guarantee scheme, it will take time to bring this proposal to fruition and we are concerned that more urgent action is needed to secure an increased flow of funds into the mortgage market now."

The Crosby report also recommended the government encourage the banking industry to adopt new standards of standardisation and transparency and encourage the International Accounting Standards Board to review the fair value accounting principle.

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