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Government Demands Summit With Mortgage Lenders

In a move which is sure to see the UK mortgage lending community pull together, there has been heavy criticism by the UK government for their apparent reluctance to reduce variable mortgage interest rates in line with UK base rates. Indeed there are rumours of a summit meeting at Downing Street at which the leading UK mortgage lenders will be asked to explain themselves.

The situation seems far from straight forward with the money markets still lacking liquidity, the UK property market showing its sharpest fall for many years and the economic situation forecast to get much worse. The Council of Mortgage Lenders (who represent the UK mortgage sector) argue that variable rates will be reduced where possible, but with liquidity still at a very low level there are still major funding difficulties.

Interestingly it has been revealed that State owned Northern Rock have not yet reduced their variable mortgage interest rate after last weeks base rate reduction.

While there are a number of factors to consider including higher funding costs for the mortgage providers and increased risk factors, there is also a need for fresh liquidity in the market place. Many are expecting a more robust approach from the Bank of England in the short term and we should hear further news later this week.

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