In an exclusive interview with Mortgage Strategy at the 20th annual IMLA dinner last week, Godfrey Blight, chairman of IMLA, said it’s vital that BoE governor Mervyn King restores investor confidence in mortgage-backed securities to improve liquidity.
He says: “I think King is on another planet – he needs to come back down to earth and address the problems with liquidity and mortgage availability. He has put this country back 20 years.”
Over the past month, IMLA has called for the government to add-ress liquidity problems more than once to no avail.
King has confirmed that although the £50bn Special Liquidity Scheme will continue for the next three years, new assets will not be considered after its original closing date of October 21 this year.
Instead, next week the BoE plans to publish a consultation paper in favour of a permanent liquidity insurance facility.
In an address to the Treasury Select Committee, King says: “It is not the purpose of central bank liquidity insurance to provide a source of long-term funding to the financial system – indeed, it cannot do that. Only private savers or taxpayers via the government can provide such funds.”
Tony Ward, managing director of Home Funding, says relying on savers is not a sound solution to the crisis.
He says: “Retail deposits are not going to be the sole solution to liquidity problems. You can’t use short-term retail deposits to fund 25-year mortgages.”
Experts from across the industry say it’s unlikely that the BoE will echo the US Treasury’s intervention into beleaguered lenders Fannie Mae and Freddie Mac.
Last week saw the effective nationalisation of the two agencies when the Federal government committed to a $200bn capital injection, new credit lines plus a plan to buy their MBS.