Warning Over Mortgage Funding Gap

• News
• Published: 05 Feb 2010 in Money and Mortgages

A trade body is calling upon the Government to lay out new reforms to put mortgage funding markets "back on a sustainable footing".

The Council of Mortgage Lenders raised concerns over a £300 billion funding gap which could appear once a current Government scheme to raise cash expires in the next four years.

The Government stepped in with a special liquidity scheme and credit guarantee scheme as the recession took hold of wholesale funding markets.

The CML fears that lenders will not be able to cope with the shortfall, warning that savers' deposits will not be enough to fill the hole come 2014. The impact of this, it says, could mean a long-term reduced mortgage choice for homebuyers.

"Without policy support, it may be difficult to re-establish a sustainable, long-term residential mortgage-backed securities and covered bond market in the UK on the scale needed to plug the funding gap," the CML said.

"That would leave firms continuing to rely on government funding, and the UK at risk of a chronic under-supply of credit - and the rationing of mortgages for customers - for many years to come."