Lenders bid to end mortgage drought

Lenders bid to end mortgage drought

Lenders have urged the Treasury to act swiftly to kick-start the mortgage market as fears grow over the UK's stricken home loan and housing sectors.

The Council of Mortgage Lenders (CML) said it had put forward a proposal that it hoped would free-up the mortgage finance log-jam.

It said it was "disappointed" that the Treasury-commissioned review of mortgage finance, which is expected to be published within the next two weeks, would reportedly not offer any solutions until autumn at the earliest.

The review, being carried out by former Halifax Bank of Scotland chief executive Sir James Crosby, is only said to be outlining the problems facing the market in the initial report.

Michael Coogan, director general of the CML, said: "If they act quickly, there is a window of opportunity here for the Government and the Bank of England to break the log-jam in the housing and mortgage markets and underpin confidence in the financial system.

"The single biggest issue in the housing market that the authorities need to address is the lack of available funding to support new mortgage lending."

He added: "A year into the credit crunch, there is no merit at all in waiting until the autumn before taking steps that will help the housing market to remain more resilient."

The CML has submitted a proposal to the Treasury, which would see banks, building societies and institutions buy mortgage-backed securities and use them as collateral in return for funding from the Bank of England.

It is designed to reignite interest in mortgage-backed securities, which have been shunned since the collapse of America's sub-prime mortgage market.

The CML added that the funding scheme would sit alongside the Bank of England's existing £50 billion Special Liquidity Scheme (SLS), launched in April to encourage lending between banks and building societies.