Speaking to Mortgage Strategy at the 20th Annual IMLA Dinner last night, chairman of the trade body Godfrey Blight says: “I think Mervyn King is on another planet – he needs to come back down to earth and address the problems with liquidity and mortgage availability.
“King has benchmarked this country back about 20 years. What he needs to do is restore investor confidence in UK mortgage-backed securities.”
He adds: “I don’t like to make predictions about when the market is going to return, as everything is so uncertain at the moment. The industry is saying 2010, and I think that’s fair. I don’t think it’s going to be much before that.”
But the BoE governor shows no sign of heeding IMLA’s warnings. In an address to the Treasury Select Committee yesterday, King says: “The Special Liquidity Scheme was only ever intended as a temporary measure, and the window for placing assets into the scheme will close as previously announced on October 21.”
King confirms plans to publish a consultation paper in favour of a permanent liquidity insurance facility next week.
But he adds: “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.
“So I hope everyone will understand that the proposals to be published next week, important though they are, will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending.”