The Council of Mortgage Lenders has asked for a lower cap to be introduced, which would mean that mortgage lenders would not be expected to reduce their mortgage interest rates beyond a certain level.
The group has described the fall in the base interest rate as a ‘double edged sword’ stating that the mortgage market could be further disrupted by plunging interest rates on savings.
Officials from the CML have expressed concern over the fact that the government has been putting pressure on lenders to cut their borrowing interest rates in response to recent cuts in the base interest rate, even though the number of savers that were being hit by falling interest rates on their savings was higher. The CML expressed further criticism of the government over issues such as lack of clarity of key priorities for the future, and over its Homeowner Mortgage Support Scheme.
The government has stated that it wants lending levels to return to those that were seen in 2007, and the CML has said that due to a lack of consumer appetite for borrowing and ongoing tight credit conditions in the market this was very unlikely to happen in the foreseeable future. It also said that over the course of 2009 mortgage lending would continue to get tighter as a result of fewer lenders on the market and lack of funding.
Finally, the CML has called for the government to put into place a far more comprehensive package of measures to try and help the many homeowners that face repossession over the course of this year, which the CML expects to be in the region of around 75,000. It added that the Homeowner Mortgage Support Scheme that the government has launched is likely to help only a small number of those that are facing repossession.