Thursday May 8, 12:26 PM
Mortgage recovery to take over 2 years
LONDON (ShareCast) - It will take at least two years for mortgage markets to recover from the credit crunch, the chairman of the Building Societies Association (BSA) warned today. When global and domestic markets do recover, homeowners should
expect them to operate in a "very different" way to how they were in the first part of the decade, Iain Cornish told the BSA conference in Manchester (MNCS.OB - news) .But looking further ahead, he predicted the return to a "more sensible" mortgage market. Mortgage lenders have already slashed the number of home loans on offer, failed to pass on a series of interest rate cuts and increased the minimum deposit required to get the best deals. Most have tried to put off new applications from those deemed high risk in an effort to manage demand. HSBC-owned First Direct temporarily closed its mortgage products to new customers recently. Cornish concedes that building societies have been a little better protected than the banks as the Northern Rock (LSE: GB0001452795.L - news) crisis prompted an influx of money from savers seeking safer havens. They also rely less on funding for mortgages from wholesale markets, which have suffered a liquidity drought since last autumn. He also backs the Bank of England's decision to offer £50bn of secure government bonds in return for potentially risky mortgage debts in an attempt to oil the mortgage market. "It is vital for the Bank of England to remain very close to what is happening in markets, and it should not hesitate to intervene further and extend the facility if that is what is needed," said Cornish.
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