New lenders won’t solve our problems


A lot of column inches are being dedicated to new banks at the moment, which I understand to an extent.

But from the perspective of the mortgage market new banks are not fantastic news.

The fact that they will initially fight for retail deposits means no new money will be injected into the system.

If a bank attracts a retail deposit away from Nationwide Building Society and then lends it to a borrower to buy a house, it’s not something Nationwide could not have done itself.

In fact, there may be a short-term increase in the cost of deposits if a number of banks start trading at the same time.

Don’t get me wrong, I think the extra competition will be good but what we need is the securitisation market returning to some extent.

The recent issuance from The Co-operative Group of some £2.5bn of residential mortgage loans was purchased by a number of buyers.

This should be seen as good news for the market in that the buyers clearly have an appetite for mortgage assets.

And the group is now in a position to use that money to generate more credit for borrowers and help the mortgage market get back on its feet.

It would be good if politicians realised the mortgage market is underfunded and that new funds would have a significant impact on the economy. But I am a realist and I doubt anything other than winning the general election is important to them right now.