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Mortgage market is sound despite turmoil - IMLA

Tuesday, 16 October 2007 12:00 AM

The UK mortgage market is fundamentally sound despite recent turmoil on the high-street and in the financial markets, according to Intermediary Mortgage Lenders Association (IMLA).

Despite falling confidence across the market and the downbeat assessment of the UK economy presented by the chancellor Alistair Darling in last week's pre-Budget report, conditions are now returning to normal says the IMLA.

"The turmoil in the financial and mortgage markets was attributable not to an actual problem with the credit quality of UK mortgage books, but concerns among investors that UK lenders could encounter the same problems as have occurred in the US," said the executive director of IMLA, Peter Williams.

"That ignored the fact that the credit quality of UK mortgages remains very good."

While their have been problems on the fringes of the property market, mainstream lending has been largely insulated from any problems.

The Council of Mortgage Lenders (CML) reports just 1.06 per cent of mortgages have been in arrears for three months or more and a mere 0.12 per cent of properties have been taken into repossession.

Give the 11.8 million mortgages in the country, these figures are tiny.

"These figures are likely to increase, but we are definitely not seeing widespread delinquency among borrowers, as happened in the 1990s," continued Mr Williams.

"While house price inflation is falling and that pattern will run through into 2008, the simple reality is that, in aggregate, demand continues to exceed supply."

The worst may also be past according to the IMLA.

"The securitisation markets are not fully back in business, but there is renewed appetite from investors who recognise the low risk nature of UK mortgage-backed assets," said Mr Williams.

"We have seen a number of private sales of loan portfolios, at less fine pricing than prior to the market disruption, but this is a clear sign that investors are now realising that the reaction was overdone."

The market is now expected to regain its forward momentum.

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