MP’s Say Mortgage Plan is Doomed to Fail
MPs have said the government scheme to kick-start the UK mortgage market is not working.
The Communities and Local Government (CLG) Committee said the £50bn asset-backed guarantee scheme (ABS) was “doomed to fail”.
Further steps must be taken to boost mortgage lending if the housing market is to recover, it added.
The government has said it was working hard to improve access to mortgages and protect jobs in the property sector.
The MPs’ report came as two separate reports – by PricewaterhouseCoopers and the Royal Institution of Chartered Surveyors (RICS) – said that UK property prices would struggle to make meaningful recoveries until mortgages were more readily available.
The Latest figures suggest that mortgage lending picked up in May. But the number of home loans was still 28% lower than a year ago, according to the Council of Mortgage Lenders (CML).
The asset-backed scheme, announced in this year’s Budget, provides guarantees on lenders’ mortgage-backed securities – a step that enables them to sell on mortgages to investors, raising new money to lend to consumers.
But restrictions on which institutions can take part, and the types of loans that it covers, meant that it had so far had limited success, the MPs said.
“In its current form the ABS is a leap that reaches across only half the chasm: impressive, but doomed to fail,” said chair of the committee, Dr Phyllis Starkey.
“If we are to meet house-building targets, then CLG ministers and senior officials must maintain pressure on the Treasury to bring forward new measures to get the mortgage markets moving.”
The report also stated the government policy gave too much attention to promoting home-ownership, with not enough attention given to the rental sector.
“We now need a vigorous debate to review this approach and formulate a more coherent vision to guide effective housing policy and investment into the future,” Dr Starkey said.
And it called for skills and capacity in the UK construction sector to be protected, warning it took ten years to rebuild capacity in the construction industry after the last recession.
For the Conservatives, Grant Shapps said the report showed the government’s “inability to get beyond headline grabbing housing announcements which later turn out to be empty”.
Kay Boycott, speaking for the housing charity Shelter, said the report was right to flag up “our obsession with home ownership”.
Future housing policy should look at making renting more attractive by improving standards in the private rental sector and giving tenants more protection, she said.
A spokesman for the Department of Communities and Local Government said the report had recognised there had been “significant additional investment in building new homes”.
“We continue to do all we can to help the housing market and are working hard with the Treasury and Council of Mortgage Lenders to improve access to mortgages,” he said.
The government had come up with new ways to protect tenants in its response to the Rugg Review, a study into the private rented sector, he said.
Banks Take Action on Boiler Room Share Scams
Some banks in UK have begun screening customer transactions to clamp down on so-called “boiler room” fraud.
It is estimated by the Financial Services Authority that up to 30,000 people a year are losing hundreds of millions of pounds to these share scams.
It happens when criminals call potential investors attempting to sell shares which are effectively worthless.
Barclays and HSBC have told the BBC they suspend transactions if they are being paid to known boiler room firms.
The two banks use a warning list published by the Financial Services Authority (FSA) which contains the names of hundreds of companies.
The FSA says the companies are not authorised and pose a high degree of risk to customers.
Barclays told BBC Radio 4’s Money Box programme it had blocked around 150 transactions since introducing a screening system in February, potentially saving customers millions of pounds.
It said although around 90% of customers contacted chose to cancel the transaction once they were told the company was on the warning list, 10% insisted on it going through.
HSBC has been screening transactions since 2006 and also said it has saved its customers millions of pounds.
A spokesman told Money Box: “If we receive requests for payments to any of these companies we will delay payments until we have checked with our customers to ensure that they are aware of the company’s activities.
“Usually, when customers realise that the companies in question are on the non-authorised list, they want to stop the payments.”
Lloyds TSB and Nationwide would not comment on their security procedures.
Operation Archway
The Financial Services Authority has been working with police officers from Operation Archway in London for several years to try to tackle boiler room fraud.
Officers say fraudsters often persuade investors to part with tens of thousands of pounds and they get about 100 calls a week from victims.
Detective Superintendent Bob Wishart told the programme the banks are playing a significant role in reducing losses.
“We’re having some notable successes. If we can help them identify potential fraud and a bank is a 100% happy that it is a potential fraud, then it can take the appropriate action,” he said.
Jonathan Phelan, FSA head of Retail Enforcement, agrees the banks are making an important contribution but believes there are limits to how successful screening by banks alone can be.
“We are in discussion with banks,” he added. “It is a very difficult area. There’s a certain amount of intrusion about it, so one has to be careful about promoting it too much.”
The Financial Services Authority and the police insist they are having some success at closing down and prosecuting the criminals involved.
The FSA said it has recently closed down six boiler room agents and recovered close to three million pounds of investors money from four boiler room operations.
Officers from Operation Archway said they are currently involved in a dozen major boiler room investigations.
The FSA says it is illegal for any broker either in the UK or abroad to cold call customers and anyone who receives such a call should hang up immediately.
