Government should help specialist firms.
Posted on June 22nd 2009
I was pleased to see that the West Bromwich Building Society found a way to maintain its independence and it is certain that other building societies will now follow the same model in the very near future. The government has now bailed out our banking system to the tune of £600 billion and invented a new form of debt to equity swap for our building societies, both actions I applaud. However, specialist lenders or non deposit taking lenders as the government calls them have not only been left out the picture the government has actively excluded them from any form of help whatsoever.
As a result anyone with a less than exemplary credit history or are unlucky enough to be self employed will find it almost impossible to get a mortgage. In addition the Private Rental Sector has been totally transformed giving tenants a significantly better quality of homes to choose from.
There are no exact numbers but I would guess that 25% of adults in the UK are now locked out of the mortgage market as a direct result of the government’s steadfast refusal to offer any form of support to specialist lenders. I am not suggesting that any form of taxpayer handout is given to specialist lenders but I am saying that specialist lenders should be given access to some form of special liquidity scheme.
For example, the government could set up a forward flow agreement for specialist lenders that had strict criteria guidelines about what type of loans could be originated and at what rates. This would be a win win solution as homeowners would get access to mortgage loans that were not readily available on the high street, the government would be directly stimulating the economy and would increase its tax receipts and mothballed specialist lenders could bring some much needed competition back into the mortgage market.
The UK once was proud about having the most dynamic mortgage market in the World, unfortunately we have now regressed back into the 1970s mortgage market of poor service from lenders and mortgage rationing. Sadly to say there is much similarity between the mortgage market and the cult TV series Ashes to Ashes, I only hope that the government wakes up and we get the mortgage market back into the 21st century sometime soon.
