A report from Moody’s Investors Service has warned the performance of UK residential mortgage-backed securities is likely to suffer over the next few years if more than £300bn in UK government aid cannot be replaced with capital from private sources.
Capital Economics says the government’s Special Liquidity Scheme (SLS) has provided £185bn in support of residential mortgage-backed securities to 32 lenders and the Credit Guarantee Scheme (CGS) has allowed lenders to raise a further £134bn. However, the SLS will end in 2012 forcing lenders to buy back their securities. The CGS will expire between 2012 and 2014. This will force banks to seek capital elsewhere.
The Financial Times’s property columnist reports that bonds secured on buildings that were packaged and sold during the boom have staged a recovery that could see such sources of debt open up again for cash-starved property owners. Commercial mortgage-backed Securities are set to make a comeback this year in the UK.
16/02/10 Financial Times 19, 20
