Prime 'should be defined' to ease housing market

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Prime 'should be defined' to ease housing market

Fri 1st Aug 2008

Prime should be defined by the government in order to ease strain on the housing market, it has been suggested.

Asset-back securities portfolio manager at Schroders Chris Ames, has posited that government plans to provide guarantees and additional legislation to help bolster the market should be avoided.

Instead, the expert claimed that the government should aim for a system similar to the German Pfandbrief, through which the government could make "a very specific definition of prime for the purposes of UK covered bonds".

Mr Ames said: "Covered bond investors are used to dealing with very commoditised and homogeneous instruments, and the UK covered bond market currently allows too much leeway in terms of mortgage quality and structure."

A functioning, liquid-covered bond market could alleviate problems in the housing market at the moment.

In related news, the Association of Independent Financial Advisors recently explained that trust could be engendered with consumers in the current economic climate if advice was differentiated from sales.

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