Lenders urge Bank of England to provide more cash
Speaking at the Council of Mortgage Lenders’ (CML) annual lunch yesterday, Steven Crawshaw, chairman of the Council, assessed the state of the UK mortgage market and the impact of the credit crisis.
He pointed out that funds made available by the European Central Bank had helped UK lenders and expressed the hope that the Bank of England would make a similar facility available “sooner rather than later”.
In his address, Mr Crawshaw suggested that banks’ reluctance to lend to one another was not necessarily a symptom of lack of trust between financial institutions but rather the result of concerns about access to future funding.
According to CML data, UK mortgage lenders provided around £108 billion in loans last year.
Mr Crawshaw warned that during 2008 this amount could be reduced by 50% and that in the months ahead, homeowners will be finding it more difficult to secure a mortgage and interest rates will continue to rise, unless the Bank of England steps in.
The industry is not only urging the Bank to inject more money into the markets but also to follow the lead of the US Federal Reserve and accept a wider range of collateral.
Last week, the Bank agreed to increase its level of funding and will provide an addition £5 billion for auction this month.
However, it has so far declined collateral in the form of loans that, according to the mortgage industry, are less than “prime” but nevertheless still sound.