The paper argues that currently the government is relying on
a few high street banks to supply the UK mortgage market, but they have
failed to use all lending resources available to them.
Exact’s white paper argues that specialist lenders should white label mortgage origination for local authorities, taking some pressure off the main
high street banks.
Exact is lobbying the government to divert funding to reinvigorate local
authorities as a force in the mortgage market.
It argues that the interest rate below which local authorities are prohibited to lend (Standard National Rate) was set too high to make local authority mortgage lending competitive with private sector lending. But the SNR has fallen to 3.93% – its lowest ever level.
Alan Cleary, managing director of Exact, says: “Reinstating local
authorities as mortgage lenders would mean the government can bypass
bank red tape and get cash back in the hands of people who want to buy
houses. At the moment, the government’s relying too heavily on just one
part of the mortgage market – the big high street banks.”
The paper highlights that the government’s Great Bank Bailout plans to
boost mortgage lending may be stabilising high street banks, but these
lenders are hoarding money to rebuild their tattered balance sheets.
They are not passing the government money on to people in the street.
Cleary adds: “These banks can’t afford to lend – there’s too
much damage to be repaired first. But the government’s ignoring a
significant part of the mortgage market – it’s littered with specialist
lenders who are paralysed by the lack of wholesale funding.
” If the government is serious about boosting the cash available to borrowers in the street, why don’t they give some of their billions to local authorities, who could lend to consumers using specialist lenders’ origination expertise? This would put taxpayers’ cash directly into the hands of the people who will spend it.”