This could be the return of the MIG.
Posted on March 3rd 2009
At last some joined up thinking from the government with an announcement last week that Northern Rock would start lending again rather than winding down its mortgage book. This is a significant statement of intent which clearly says that the government is prepared to use the taxpayer’s shareholding in the banking system to restart lending. The Rock will start lending slowly this year and accelerate in 2010 but I have no doubt that the number of mortgage products available at the end of 2009 will be significantly higher than at the start. There were 40,000 mortgage products available in January 2008 but this had fallen to circa 4,000 by December 2008. Clearly Northern Rock is not a solution in itself but I would expect Alistair Darling to use his influence to get RBS, Lloyds/HBoS and B&B lending again.
The government cannot allow nationalised or part nationalised banks to focus purely on repaying government debt. No doubt the boards of these banks will be desperate to return their businesses to independence but we need some balanced thinking, surely Northern Rock has proved to be a good case study.
What is needed urgently is a way to get higher LTV lending going again especially for FTBs. Even those of us who had loans of less than 70% in the summer of 2007 are likely to need some stimulation to even consider moving property, arguably we could have LTVs well into the 90% category. Therefore, innovation is going to be required in order to beat the conundrum of lending at higher LTVs whilst house prices are falling; could this be the return of the MIG?
