Bond plan a case of too little, too late

For some time I\'ve been calling for the tripartite authority to take decisive action to address the liquidity crisis engulfing the market and it has finally made its move.

The Bank of England’s plan to enable banks to swap mortgage debts for secure government bonds took pride of place in many news reports but I think it’s a case of too little, too late.

The plan might help large balance sheet lenders but what about the little guys, such as the building societies that have strived to offer members fair deals and the independent lenders that could deliver further innovation?

The devil is in the BoE plan’s details. It will only accept AAA securities and won’t cover their market value. While I agree it’s important to protect taxpayers, is this all the government could come up with?

There’s no doubt that the plan will allow eligible lenders to shore up their balance sheets and as a result some confidence should return to the market. But it took the government eight months to intervene so the plan is likely to be a damp squib. Any boost to institutional confidence will take time to filter through to LIBOR so the chances of the mortgage market improving this side of January are remote. If the plan had been launched last autumn we may have seen a recovery this year but the delayed reaction by the government has put paid to that.

What does the BoE expect us to do while we wait? My firm refuses to sit back and do nothing. It’s our intention to survive so we are looking at the alternatives.

We’ve always recognised the need for positive action and have been looking at fresh opportunities and initiatives that will open up the market not only for ourselves but our broker partners too. With a wave of financial problems sweeping the country, attitudes to credit and spending are changing and we must not be afraid to embrace and use these developments.

These are turbulent times and every firm in the mortgage intermediary market needs to rise to the challenges that these times bring.

With the market likely to remain in a state of flux for the foreseeable future, now’s the ideal time to diversify business interests and explore the potential associated with protecting clients’ financial futures.

l See Cover Story, pages 28 to 31