Brown Under Pressure To Boost UK Mortgage Market
The US Government’s action to bail out Freddie Mac and Fannie Mae banks has left the UK Government exposed to pressure to take action too. A scheme is being considered which could put mortgages on the books of the Bank of England, making the UK taxpayer responsible.
Following the dramatic action by the US Government to rescue ailing mortgage banking giants Fannie Mae and Freddie Mac, in Britain there is increasing pressure on Prime Minister Gordon Brown and Chancellor Alistair Darling to take more decisive action to assist the UK housing market.
The American action boosted stock markets around the world, with rises of more than 2.5% on all major markets. However, these came on the same day that the Nationwide forecast that British house prices could suffer a 25% fall before beginning their recovery. This would result in millions of home owners falling into negative equity. There are also reports that estate agents are selling less houses now that at any time since 1978 – when records began.
There are currently proposals under consideration in the UK to boost the mortgage market which could result in the taxpayer being responsible for mortgages in a guarantee scheme like that used for Northern Rock. New home loans could become part of the Bank of England’s books, thereby making the taxpayer liable.
Such a scheme would, however, make it easier for new buyers to borrow money and take the strain off the balance sheets of the banks. In doing so, this should free up the money markets, still paralysed by fear of lending money to other financial institutions. Banks are still fearful of lending to each other, with concerns still lingering following worthless ’subprime’ loans in America.
Supporters of Gordon Brown, who is under intense pressure, hope that such a scheme would be free-up the housing market, and give the PM’s popularity a boost.
Jeremy Leaf of the Royal Institution of Chartered Surveyors said that the housing market was being prevented from showing any real signs of recovery by a lack of mortgage liquidity. In such a situation, most people were being denied the chance to get onto the next rung of the property ladder.
