Mortgage markets could take two years to settle

According to officials from the Building Societies Association the mortgage markets in the UK could take two years to settle following the chaos that has ensued as a result of the global credit crunch, which still maintains its hold on the money markets in the UK.

Lenders have found it increasingly difficult to secure finance on the wholesale money market in order to fund their mortgage operations, and this has resulted in higher interest rates on borrowing, far fewer mortgage products, and far tighter loan lending conditions, all of which have impacted on both the mortgage and the housing markets.

One official from the 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 did add that building societies were not suffering to the same degree as larger lenders, adding: “Clearly we entered troubled waters in a fundamentally sound vessel. Societies generally are well capitalised, highly liquid and prudent businesses.”