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Securitisation market for prime loans back by 2011, says IMLA

Some 75% of intermediary lenders think the securitisation and whole loan sale markets for prime mortgages will be back in action by 2011, shows the Intermediary Mortgage Lenders Association’s latest survey of its members.

A similar proportion, 73 % say the British economy would start to strengthen in 2010.

The IMLA research also revealed that intermediary lenders expect Libor spreads to narrow gradually over the coming year.

Currently 3-month Libor hovers at about 1% above Bank base rate.

IMLA members forecast the 3-month Libor spread to reduce to around 75 basis points by the end of 2009.

While this spread remains significantly wider than the historical average of between 25 and 30 basis points, it suggests confidence among lenders may be slowly returning.

Peter Williams, executive director of IMLA, says: “It might feel as though the past eighteen months have been a mortgage apocalypse, but this research shows there’s hope. The securitisation funding model is basically sound, and I think it’s realistic to expect activity to resume gradually when industry reforms and the government asset guarantee scheme is finally up and running.

“Ideally this scheme will encourage liquidity back into the securitisation and wholesale markets. With more money available, IMLA hopes to see banks re-open warehousing facilities to non-bank lenders. This would allow specialist lenders to get back in the market, and spread the pressure of UK residential lending among a larger number of players.

“Once lenders unshackle themselves from so-called “toxic debt”, the wholesale money markets should be much more transparent, giving lenders the confidence to lend to one another again. Reactivation of the securitisation market would boost mortgage lending and all lenders’ capacity to provide credit. It’s the vital next step – the government must push through the asset guarantee scheme as quickly as possible.”

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