Mortgages: Action to kick-start housing market

The Chancellor said yesterday that the Government was willing to provide guarantees on bonds backed by mortgages to get the market for new home loans moving again.

Alistair Darling said he accepted the key recommendation of the Crosby report into mortgage finance and that the Government would work to come up with a plan that met EU state aid requirements and complemented the Government's credit guarantee scheme for banks. In his report, Sir James Crosby, the former chief executive of HBOS, said government intervention was needed to unblock mortgage finance markets frozen by the collapse of confidence in the housing market and mortgage-backed bonds.

Sir James urged the Government to guarantee £100bn of mortgage-backed securities over the next two years. The Government would auction guarantees that would be attached by lenders to blocks of AAA-rated mortgage-backed securities issued to fund new lending. Lenders would retain the credit risk and would have to hold capital against the loans and would pay the Government a rate of interest for the guarantee according to the amount arrived at in the auction.

The guarantees would only cover mortgages for changes of ownership. Sir James argued that the likelihood of losses on AAA-rated mortgage-backed securities was "comparatively remote". "In a market starved of confidence the proposal therefore amounts to the Government charging for access to the confidence that attaches to its credit rating," he said. "Such intervention should ensure that a cyclical correction in the housing market does not turn into something much more serious with all that would ultimately imply for the wider economy."

Britain's banks massively increased their lending at cheap prices during the credit boom by drawing in funding from investors to replace traditional deposits. They gained much of this funding by parcelling up their own mortgages into bonds for sale to investors.

UK residential mortgage-backed securities ballooned from £13bn in 2000 to £257bn last year but investor appetite for these bonds collapsed in August 2007 as defaults rocketed on US sub-prime mortgages. Sir James said UK banks' mortgage lending would be hampered by their inability to replace £160bn of redemptions on mortgage-backed securities in the market between now and 2010.

Mr Darling said: "We will proceed to work up a detailed scheme based on [Sir James's] recommendations and seek state aid approval to proceed." Mr Darling said that he would report back by the Budget.

The Council of Mortgage Lenders (CML) said: "The CML urges the Government to proceed as quickly as possible in seeking the necessary permissions to proceed."

Brown on Brown: I'm in for a long cold winter

Jill Brown, 67, lives in Salisbury and suffers from a neuro-muscular disease that leaves her wheelchair-bound. She receives a pension of £200 a month from her time working in the NHS as a physiotherapist and gets a disability living allowance.



"The rising cost of living has been particularly hard this year and I know all low-income pensioners like me were watching what the Government has to say very closely. Ordinary household items, food, petrol and fuel have all shot up and there has been no equivalent rise in pensions or allowances for disabled people.

"I do get help with the fuel bills through the winter fuel allowance, but I find it only really covers a few weeks either side of Christmas. I get cold very easily and with the fuel bills going sky-high this year I'm in for a long cold winter.

"The extra £60 one-off payment will be most welcome. The cut in VAT might help a little bit with the food bills, but it's not going to encourage me to go out spending. As for the pension increase of £5 a week, it's hardly much is it? All it takes is for the council to put up council tax and that's wiped out in an instant.

"What does worry me is how we are going to pay for all this borrowing in the future."

Voices
Stephanie first after her public appearance as a woman at Rad Fest 2014
voices

Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
Voices
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Life and Style
tech

Board creates magnetic field to achieve lift

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
Russell Brand at an anti-austerity march in June
peopleActor and comedian says 'there's no point doing it if you're not'
Arts and Entertainment
Sister Cristina Scuccia sings 'Like a Virgin' in Venice
music

Like Madonna, Sister Cristina Scuccia's video is also set in Venice

News
i100
Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004
music

Singer says the track was 'force-fed down people's throats'

Life and Style
The Tinder app has around 10 million users worldwide

techThe original free dating app will remain the same, developers say

News
news

Endangered species spotted in a creek in the Qinling mountains

News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
News
peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style
health

Some experiencing postnatal depression don't realise there is a problem. What can be done?

Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Nursery Nurse

Negotiable: Randstad Education Manchester: Level 3 Nursery NurseI am currently...

KS2 Teacher

£21000 - £34000 per annum + Excellent rates of pay, CPD, Support : Randstad Ed...

Nursery Nurse

Negotiable: Randstad Education Manchester: Level 3 Nursery nurse required for ...

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album