Anger grows over chancellor’s failure to press ahead with Crosby report recommendations

Housebuilders reacted with mounting anger this week to the failure by chancellor Alistair Darling to act on recommendations to get the mortgage market moving.

A report by Sir James Crosby, deputy chairman of the Financial Services Authority, into problems in the mortgage market said the government needed to underwrite mortgage-backed bonds to the tune of £100bn to persuade banks to lend more.

However, Darling said the government would investigate the proposal and look to update the industry at the time of the Budget.

He said the Treasury would seek approval from the EU to waive competition regulations. He also set up a panel with business secretary Lord Mandelson to monitor lending to households and businesses (see below).

A source at one of the major listed builders said initial relief that Darling had not dismissed the proposals had been replaced by frustration at his failure to press ahead with the plan. He said: “The anger is mounting. It’s a bloody good idea and he’s effectively put this back for six months.”

The dismay was echoed by large and small builders. Roger Humber, strategic policy adviser to the House Builders Association, which represents smaller builders, said: “This is the only thing in the pre-Budget statement likely to have any significant impact. We want a three-day negotiation, not three years.”

Stewart Baseley, executive chairman of the Home Builders Federation, whose members include the major listed housebuilders, said: “We’re extremely disappointed. This is a huge missed opportunity. We need action now.”

Crosby’s report called for a “government guarantee”, related only to new purchases, which would underwrite lending on the best “AAA”-rated mortgages.

The plunge

House purchases from June 07 to Oct 08

The value of loans for house purchases has fallen 77% from its peak of £11.96bn in November 2006, the British Bankers’ Association says.
Figures for October show that just £2.8bn of loans for homes were advanced by the major high street banks, almost 60% down on the same month in the previous year.

The number of loans fell from 78,593 at the peak of the boom to 21,584 in October (see graph).

The body also announced loan values had fallen from September, down 9.7% from £3.1bn, despite the fact the Bank of England dropped base rates by 0.5 percentage points and the government raised the stamp duty threshold.

The news follows the admission yesterday by Sir James Crosby, deputy chairman of the Financial Services Authority and former chief executive of HBOS, that net mortgage lending could fall to zero next year, as Building predicted this month.