A glimmer of light?
Chris Cummings - Director General - 27th August 2008 - 11:08
This is my first blog since returning from a 'stay-cation' which apparently is all the rage. Unlike a normal 'vacation' a 'stay-cation' is holidaying in the UK. Given this credit-crunch world and environmental concerns, it's the trendy thing to do (apparently - or so my kids tell me anyway!).
Today sees the publication of the Lib Dems action plan for the mortgage market. A full response and analysis will be sent to members and we will be discussing the impact on the market, and members, with Vince Cable and team.
The Lib Dems aren't the only ones pondering the mortgage market's travails. I interrupted my stay-cation to meet with David Cameron and colleagues at his mortgage policy summit. We covered the whole waterfront of issues on housing and mortgages and it was a very valuable exchange.
I also had the opportunity to answer questions on AMI's 'Fixing the crunch' White Paper that we published some months ago. Members will recall one of the solutions we put forward was to entice pension funds back into buying mortgage backed securities. This is an avenue AMI pursued before, and after, the White Paper's publication. Our discussions with the pensions industry all pointed to the fact that they recognised the better value in these portfolios but were reluctant to buy in a falling market as the assets kept on getting better while the price kept on getting cheaper!
It does seem that market forces are now taking over and a glimmer of light is appearing in the tunnel. Today's Financial Times reports on the growing appetite from pension funds for collateralised loan obligations (CLOs) with the potential to bring tens of billions of dollars into the credit markets. The UK impact, if the trend were to continue, would be most helpful in freeing up new liquidity for mortgage lending.
With BBA figures showing mortgage approvals remaining close to record lows (22,448 mortgage approvals in July), the market needs some good news. The BBA figures may at least point to a stabilisation of approvals but it in no way looks like a recovery. For that, we will have to wait until 2010, unless the public policy pressure moves away from the 'laissez faire' approach now being pursued. This is a long time not only for the industry but, more importantly, for borrowers. I do not think it is good news for the UK economy to lend only to those with a 25% deposit! With the Lib Dems and Conservative Party already known to be pondering policy, we will have to wait until September to see what the Government plans to do.