Quality of mortgages 'not the problem' in housing market

16-Jul-2008

Both the acquisition of Alliance and Leicester by Banco Santander and troubles facing US mortgage firms Fannie Mae and Freddie Mac are indicative of "unusual market conditions", according to analysts.

Sue Anderson, head of member and external relations for the Council of Mortgage Lenders, said an "unusual set of global conditions" in the housing and mortgage sector - and not the underlying quality of UK mortgages - is responsible for problems in the market.

"I think the thing that worries the UK market is the fact that global investors, to the extent that they still exist, have been spooked and sentiment has become negative around mortgage securities anywhere, even good quality mortgage securities like those in the UK," she remarked.

"That has led to us having a problem in terms of a shortfall in the aggregate amount of funding into the mortgage market and investment into the mortgage market, which hasn't really been logically based," she added.

Banco Santander, the Spanish owner of Abbey, confirmed this week that it is in talks to buy mortgage lender Alliance and Leicester.

Meanwhile, Fannie Mae and Freddie Mac - which own or guarantee around half of outstanding mortgages in the US - announced billions in losses in the country's housing market.

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