All mortgages in Britain will be in effect graded and the least risky will be given an official seal of approval, under plans designed to reopen the market for wholesale mortgage financing to be unveiled in next week’s Budget. Financial Times, Daily Telegraph
Alistair Darling will publish plans that will see a 'gold standard' kitemark for batches of mortgage-backed securities that comprise only those loans that meet higher standards of creditworthiness and quality thresholds.
Yet banks have warned that the move could lead to the creation of a two-tier system, which while cutting costs for less risky loans drives up the costs for poorer, less creditworthy customers and those seeking mortgages with higher loan-to-value ratios.
The chancellor hopes that after a quick consultation with banks on the exact nature of mortgages that will qualify for the kitemark and how the scheme will be administered, he will be able to introduce it by the autumn.