Darling launches mortgage task force

Chancellor Alistair Darling has announced the launch of a working group to establish what options are open to the government for improving the function of the mortgage market.

The working group will draw on the experience and expertise of lenders, investors and the Tripartite Authorities (the treasury; Bank of England [BoE]; and Financial Services Authority [FSA]) in an attempt to mitigate deteriorating market conditions in the UK.

Speaking earlier today, Mr Darling confirmed the group of mortgage industry experts would be led by Sir James Crosby – deputy head of the FSA.

"The recent and ongoing disruption in global financial markets has raised complex issues about the functioning of the mortgage-backed securities markets," explained the chancellor.

"I am delighted to announce that Sir James will chair the industry working group that will consider market-led initiatives to improve these markets. This work will be an important contribution to stabilising the cost and supply of UK mortgages."

The establishment of the working group follows the publication of the treasury's Housing Finance Review (HFR) alongside Budget 2008.

Concerns have also been heightening following the recent correction in house prices, with Halifax yesterday reporting a 2.5 per cent drop in average property prices during March.

It was confirmed the working group will consider options for improving the mortgage-backed securities market, including measures aimed at broadening the investor base for mortgage-backed securities and improving the robustness of the market.

The group's first task will be a broad-based assessment of the current state of the mortgage finance market.

"I am very pleased to be playing a part in this work," said Sir James.

"These difficulties stem from problems in the markets, so to be effective any proposals to deal with them must be market-developed and market-led.

"Our job in this group will be to facilitate a discussion between lenders, investors and the authorities with a view to identifying market-led solutions that will work."

The launch of the working group has been welcomed by the Council of Mortgage Lenders (CML).

"The working group has been given a broad remit to consider what is needed to restore confidence in mortgage funding markets," said CML director general, Michael Coogan.

"Of particular importance is the acknowledgement the market needs more effective disclosure of the quality of underlying mortgage assets, which in the UK remains good.

However, the government must act now if action is to be effective, argues the CML.

"While the working group is developing its proposals, we therefore believe there is a need for more immediate action by the central banks, in particular the Bank of England in the UK, to address market funding problems," concluded Mr Coogan.