BSA estimates two years to correct mortgage market

The mortgage market in the UK has been going through a chaotic time over the past six months since the global credit crunch swept across the country.

Lenders have found it very difficult and expensive to secure funding for their mortgage lending operations, and consumers have experienced increased difficulties and expense in getting a mortgage, with interest rates rising, deposit requirement rising, and a steep drop in the number of mortgage products available.

Having already ploughed billions in to the money markets to try and increase liquidity the Bank of England has recently launched a £50 billion mortgage rescue plan that will allow lenders to exchange mortgage assets for government bonds in order to increase confidence amongst lenders and increase liquidity. However, according to officials from the Building Societies Association it could still take two years for the mortgage markets to be rectified.

Speaking of the rescue plan one official from the Building Societies Association stated: “It will not in itself solve the credit crisis, it certainly isn’t going to reverse all the changes in lending policies we have seen in recent months, or restore mortgage lending to its former levels, but it should help to underpin confidence. It is vital for the Bank of England to remain very close to what is happening in markets, and it should not hesitate to intervene further and extend the facility if that is what is needed.”

He added that building societies had not experienced the same difficulties as many larger lenders, adding that the Northern Rock crisis had seen building societies take a bigger share of the market.

He said: “Clearly we entered troubled waters in a fundamentally sound vessel. Societies generally are well capitalised, highly liquid and prudent businesses.”