Wholesale mortgage market to return in 2011 - IMLA

Three in four intermediary lenders believe the wholesale loan and securitisation markets will be back in action by 2011, according to research.

The Intermediary Mortgage Lenders' Association's (IMLA) latest survey of its members, found a similar proportion (73 %) said the British economy would start to strengthen in 2010.

The IMLA research also revealed intermediary lenders expect Libor spreads to narrow gradually over the coming year. Currently 3-month Libor hovers at about 1% above Bank base rate. IMLA members forecast the 3-month Libor spread to reduce to around 75 basis points by the end of 2009.

Peter Williams, executive director of IMLA, said: "It might feel as though the past eighteen months have been a mortgage apocalypse, but this research shows there's hope. The securitisation funding model is basically sound, and I think it's realistic to expect activity to resume gradually when industry reforms and the government asset guarantee scheme is finally up and running.

"Ideally this scheme will encourage liquidity back into the securitisation and wholesale markets. With more money available, IMLA hopes to see banks re-open warehousing facilities to non-bank lenders. This would allow specialist lenders to get back in the market, and spread the pressure of UK residential lending among a larger number of players.

"Once lenders unshackle themselves from so-called "toxic debt", the wholesale money markets should be much more transparent, giving lenders the confidence to lend to one another again. Reactivation of the securitisation market would boost mortgage lending and all lenders' capacity to provide credit. It is the vital next step - the government must push through the asset guarantee scheme as quickly as possible."