Rekindling the market for mortgage backed securities reform

Dearth of funding is the major constraint

The Council of Mortgage Lenders (CML) welcomed the government's in-principle decision to accept the recommendations of the Crosby report to rekindle the market for mortgage backed securities. The CML have urged the government to proceed as quickly as possible in seeking the necessary permissions to proceed, as the dearth of funding is a major constraint to the current mortgage market.

The CML also confirmed it looks forward to playing a full and constructive role in the new public and private forum to monitor and review the flow of lending. It is important that the government looks not only to individual banks to achieve its objectives, but across the entire spread of the lending industry.

The CML in principle supports a standard 3-month period of negotiation before lenders begin court proceedings for possession. However, the detail will be important, as it may postpone rather than change a lender's decision to seek possession. Supporting the income of households in difficulty is just as important, which is why the CML supports the further modest improvements to the Income Support for Mortgage Interest scheme. The CML believes further support through this scheme will be necessary and should be included in the 2009 Budget, if it is to address the increasing number of borrowers who may lose their jobs in 2009.

Pre-Budget Report main POINTS

Housing support package
The government will offer an overall housing support package worth £1.8bn.

Affordable housing
An extra £775m will be brought forward to invest in new housing and modernisation schemes.

Mortgage rescue scheme
The government said that the scheme would be extended to those with a second mortgage.

Mortgage interest scheme
The limit on the mortgage interest scheme is to be raised from £100,000 to £200,000.

Repossessions
Main lenders agreed to wait three months before starting a repossession order against struggling homeowners.