Franky on Finance

The Government is planning to use next week’s budget to introduce plans to grade all mortgages in a bid to kick start the wholesale money markets.  Chancellor Alistair Darling is understood to be arranging the introduction of a new system under which all mortgages are graded, with the least risky awarded a gold standard ‘Kitemark’.  Investors have been reluctant to buy mortgage-backed securities for fear they contain risky sub-prime loans and this has made it difficult for banks to remove mortgage assets from their books.  It is hoped that by providing investors with greater reassurance about the quality of the loans they are taking on, it will make it easier for lenders to sell on mortgages to investors.  The scheme could help re-vitalise the wholesale money markets and provide banks with access to cheaper funding, which subsequently could be passed on to consumers in lower mortgage rates.