Calls for 'floor' on mortgage rates
Updated on 13 January 2009
The Council of Mortgage Lenders has called for the introduction of a "floor" beyond which lenders would not be expected to reduce their mortgage rates.
The group warned that falling interest rates were a "double-edged sword", adding that the impact of lower rates on savings levels was another potential source of disruption to the mortgage market.
It criticised the Government for exerting ministerial pressure on lenders to pass on recent interest rate cuts to their borrowers, when the number of savers adversely affected by lower rates was far higher.
It also accused the Government of not being clear about its key priorities for the future, with it calling on banks and building societies to deliver a "conflicting series of outcomes" for different consumer groups.
The group also urged the Government to "rethink" its measures to improve the flow of mortgage funding and criticised its recent Homeowner Mortgage Support Scheme, which aims to help people avoid losing their home.
The attack came the day before the CML's director general Michael Coogan is due to appear before the Treasury Select Committee.
In its News & Views news letter, the CML warned that the continuing constraints on funding and a sharply diminished consumer appetite for debt meant there would be no return to the lending levels of 2007, as the Government wants, in the "foreseeable future".
It added that with fewer lenders active in the market and less funding available, mortgages would continue to be rationed during 2009.
Overall it expects net lending to be minus £25 billion this year, while total advances will be less than half the level seen in 2007.
The group also called on the Government to adopt a "much more ambitious" package of measures to support homeowners if it wanted to "keep in check" the 75,000 home repossessions the CML expects this year. It said the Homeowner Mortgage Support Scheme, under which people who lose some or all of their income can defer interest payments on their mortgage for up to two years, was "well-intentioned", but may only be an option for a relatively small number of borrowers.
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