From the Times Online:
Sir James Crosby, former chief executive of HBOS, who is carrying out a review for the Treasury, said that the “shortage of mortgage finance will persist throughout 2008, 2009 and 2010, and I suspect that current forecasts for new mortgage lending during this period will prove optimistic.”
As expected, Sir James ruled out setting up a US-style government-backed mortgage agency like America’s Fannie Mae to kick-start the UK market.
However, he hinted that British banks could be allowed to swap new mortgages for government debt.
This would extend an existing scheme that was introduced by the Bank of England in April, which lets banks exchange parcels of mortgages, known as mortgage-backed securities, to sell in the market for government debt….
Sir James said in his report: “I am looking with some urgency at the full range of options identified by market participants for stimulating the supply.”
But he also said that it was “debatable whether this sort of approach would help or prolong the transition to better functioning markets in the long term.”
While hinting at some options to reignite the UK mortgage market, Sir James also said that doing nothing may be the best course of action.
What a refreshing point of view. And this from a former banking senior executive.