Industry Reacts to Crosby Mortgage Report

Sir James Crosby's gloomy interim report on the state of the UK mortgage market has met with a mixed industry response.

Released yesterday, the study predicted that the mortgage market would continue to be affected by the credit crunch - with cheap loans remaining hard to come by until 2010. Due to the financial crisis, mortgage firms have become far more risk-averse, turning away borrowers they would previously have advanced funds to.

In the report, Sir James indicated that expanding the Bank of England's Special Liquidity Scheme (SLS), which aims to boost the mortgage market by allowing lenders to swap hard-to-value assets with easy-to-sell government bonds, remains a possibility. However, he also ruled out the creation of any US-style public money-backed mortgage lenders as ineffective.

The report has met with a warm welcome from the Council of Mortgage Lenders. Director general of the body, Michael Coogan, said: "Today's analysis at last sets down an independent welcome marker that intervention to address the mortgage funding gap is both appropriate and necessary…we now look forward to working urgently with the Treasury over the summer on proposed solutions."

However, the National Association of Estate Agents (NAEA) hinted in its response that Sir James' recommendations might not go far enough, and that more drastic action would be needed to reverse the effects of the crunch. "The report findings state that "shortage of mortgage finance will persist throughout 2008, 2009 and 2010", therefore the sooner we find a remedy for these underlying problems in the market place the better," NAEA chief executive Peter Bolton King said.

"Undoubtedly, the recommendation that the government effectively underwrite new mortgage lending will go along way to ensure the flow of mortgages begins to move once again. We really want to see swift action from the government to ease the current pressure and give consumers access to funds."

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