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Chancellor launches initiative for lenders
Following Gordon Brown's statement about the need to take further steps to improve the way the mortgage markets work the Chancellor of the Exchequer, Alistair Darling, has announced a number of new initiatives to ensure lenders have the best access to capital market finance, and consumers are able to take the most informed choices when buying a mortgage.
Speaking in the House of Commons, the Prime Minister announced that the Chancellor will consult on creating a new regime for covered bonds which will help mortgage lenders finance more affordable 20 to 25 year fixed rate mortgages. And he will report by the time of the Budget on how to overcome any barriers preventing lenders from offering people long-term mortgages, including the case for changes to instruments used by the Debt Management Office.
New legislative proposals for a covered bond regime in the UK - to assist mortgage firms to finance their lending over the longer-term - are due to be published next week.
The proposals will enable firms to take advantage of the special status that covered bonds, which satisfy certain criteria, are accorded under EU law, and will give lenders greater opportunity to participate in the covered bonds market, worth over Euro 1.5 trillion in Europe, and ultimately enable them to finance more affordable longer term fixed rate mortgages.
Covered bonds are a class of corporate bond issued by credit institutions and secured against collateral, typically mortgages and public sector loans. Credit institutions are already able to issue covered bonds in the UK, and are doing so. However, not as many bonds have been issued in the UK as elsewhere in the EU.
Meanwhile, a Treasury led review to identify any further barriers to lenders wanting to raise funds in wholesale markets, will be undertaken. This is specifically aimed at lenders wanting to offer both competitive longer term fixed rate mortgages, and a wider variety of housing finance products.
The Treasury, working closely with the financial services sector, will report on its findings at Budget 2008.
Finally, the Government will provide backing for a Private Members Bill, currently before the House, which will increase the proportion of funds which may be raised in wholesale markets, giving building societies more flexibility in financing their mortgages.
Further details of these proposals will also be set out in the Government's housing Green Paper due to be published shortly.
Moneyextra.com recommends you take independent financial advice before acting on any article
Back2007-07-12 10:41:49 © Moneyextra.com
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