Government rescue plan may take time to take effect
According to industry officials the recently launched government mortgage rescue plan could take some time to take effect, and in the meantime the mortgage sector will continue to remain inaccessible and expensive for many consumers. The £50 billion plan was launched by the government recently in a bid to increase confidence amongst lenders in order to encourage them to lend to one another at affordable rates, which in turn could help to increase liquidity.
The plan will enable mortgage lenders to exchange mortgage based assets for government bonds. However, whilst the plan was welcomed by mortgage industry officials many have claimed that its will take some time to take effect, and therefore people should not expect the mortgage market to turnaround overnight. In fact, officials from the Building Societies Association recently stated that it could take a couple of years for corrections in the mortgage market to take place.
One official from the Treasury recently confirmed: ‘We expect to see an impact but over time.’
An official from the Council of Mortgage Lenders stated: ‘In the short term the trend of increasing prices and products being removed from the market is not going to be reversed. As and when the banks start lending to each other, the rate for lending will go down and that means that that will start to bring the price down but it is not going to be a dramatic reversal. It is going to be a slow process at best.’
Another industry professional said: ‘For now, mortgage pricing will remain high. If anything, it will increase in the short term.’
One also added: ‘The credit crunch will still hit the economy but it might have hurt more if it weren’t for these measures. The measures prevent the risk of a possible recession becoming a depression.’
Recent news:
- Seller experiencing problems with home buyers
- Mortgage market could continue to suffer for another two years
- Even the government expects house prices to keep falling
- More help to be offered to homeowners facing repossession
- Estate agents at risk of problems due to mortgage and housing chaos
- Brokers complain over lack of access to mortgage deals
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