Categories: Credit Crunch / Crisis management

11 December 2008

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More home truths from mortgage lenders

Here is a good example of preemptive crisis management. It is a text-book example of how to manage a controversial issue by facing up to market realities.

The Council of Mortgage Lenders (CML) has made public how mortgage lenders are caught in a tug of war. It has exposed how the government has asked mortgage lenders to set “conflicting and incoherent” priorities. Michael Coogan, director general of the CML, pointed out yesterday:

“To different degrees lenders are facing conflicting pressures to recapitalise against possible future losses, service government’s preference shareholdings at 12 per cent, pay a premium to access the Bank of England Special Liquidity Scheme, show forbearance to borrowers in arrears, follow base rate moves down to help their existing borrowers, keep savings rates high to support existing savers, and provide competitive rates to new borrowers and savers to maintain economic activity in a recession.

The truth is that there are no easy answers. There are only tough choices; something that the British Bankers’ Association has also uefully made clear.

Any impression that mortgage lenders or banks can please all their stakeholders equally is highy misleading and sets false expectations. It is good to see that honesty and directness is being favoured over fudge and nonesense, which were causes of cynicism and lack of trust in the first place.

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