The Government recently announced a package of announcements designed to support lending in the economy with many in the property industry wholeheartedly welcoming them.

The CML has been asking for more than a year for measures to support investor confidence in mortgage-backed securities (MBS), so the guarantee scheme for asset-backed securities announced is particularly welcome. The CML believes it should help to restart the securitisation market, although at a detailed level the scheme may still be too tightly drawn, appearing to be restricted to AAA-rated securities (the highest credit rating given by debt analysis agencies such as Standard & Poor’s, Moody’s, and A.M. Best) , and excluding non-deposit-taker lenders.

The Home Builders Federation (HBF) has also been demanding for a number of months for the Government to extend the credit guarantee scheme as recommended by Sir James Crosby in his report on mortgage finance in November. However, according to the HBF, the key to the success of the measures will be the bank’s reaction and the extent to which they take up the facility. If implemented successfully and combined with a wider package of measures, HBF believes the announcement could finally start to reverse the downturn in the housing market, so critical to the wider economy.

The CML also welcomes the announcement of changes to the Northern Rock strategy relating to the repayment of its obligations to Government, which will have the effect of reducing the negative impact caused on the mortgage market by the shrinkage of Northern Rock’s mortgage book. This should mean that more of the funding that is available may go towards home purchases rather than remortgaging, which would help to support wider activity in the market. The HBF hopes that the influence the Government now has with the other major mortgage lenders will result in similar commitments.

Michael Coogan, CML’s director general, said: “At long last, the Government has announced a comprehensive and co-ordinated package of measures sufficiently large in scale to have an impact on improving the flow of new lending.

“As always, the devil will be in the detail and there will be a great deal to work through. No doubt, there may still be disproportionate impacts on some firms or some sectors from the latest measures, but overall this is a helpful package that we think is much more likely to help lending flow more effectively again than the steps that have been taken to date. It is too soon to assess what impact these interventions may have on lending levels in 2009, but they should be helpful.”