Lenders hope for boost from Crosby
The crumbling housing market is holding its breath for the publication of the Crosby review tomorrow into the funding struggles facing British banks, amid speculation that the government is working on a new mortgage debt swap plan to help soften the effects of the credit crunch.
Sir James Crosby, the former HBOS chief executive and deputy chairman of the Financial Services Authority, will publish his interim report into the problems faced by the secondary mortgage market tomorrow.
The Treasury last night downplayed reports that it is already working on plans to pump millions of pounds into the mortgage market by swapping new mortgage debt acquired by banks for government bonds.
It is understood that Crosby will not issue any recommendations to Chancellor Alistair Darling until the final report is published in time for the Pre-Budget Report at the end of September, early October.
Treasury sources last night stressed that Darling was waiting for the final recommendations to be issued before deciding on what policy actions needed to be taken.
Crosby was appointed by the Chancellor to investigate ways to boost confidence in the mortgage market after the credit crunch forced banks to put a squeeze on new lending.
In its submission to the review, the Council of Mortgage Lenders called for the government to grant a new lending facility to banks as well as the special liquidity scheme at the Bank of England introduced in April.
This allowed banks to swap old mortgage debt for government bonds.
The CML said this would make it easier for lenders to borrow cash.
The British Bankers’ Association said last week that mortgage lending dropped by two thirds as it became more difficult for them to raise money on the wholesale markets.
Banks granted 21,118 new mortgages last month, a drop of 67 per cent on June last year, which is the biggest fall since it began collecting data in September 1997.