Lloyds Banking Group revealed yesterday that it was hoping to find buyers this week for more than £2.8 billion of new mortgage-backed securities.

If successful the deal would encourage other banks to look at the wholesale markets, and could help to boost the supply of mortgages and put downward pressure on mortgage rates

Before the current economic crisis, 50 to 60 per cent of all mortgages were financed by such wholesale securitisations. These have, until recently, been unattractive to investors’ in light of the reducing value of similar securities backed by sub-prime US mortgages.

The last successful launch was by Alliance & Leicester in August last year.

The lack of wholesale finance has helped to keep mortgage rates up, which for the most part have not followed the base rate, and shortage of mortgage finance has left homebuyers with small deposits unable to find mortgages.

With buyers prepared to pay higher prices as the UK economy shows signs of recovery and as the housing market stabilises, the secondary market for mortgage securitisations has begun to warm up.

The main UK lenders reported in August that net mortgage lending had picked up slightly, according to research by the Bank of England.

This entry was posted on Tuesday, September 22nd, 2009 at 2:01 pm and is filed under Financial Advice, Mortgages . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.