Saving a country's economy from a financial meltdown is a balancing act, but in the end there is no easy solution - just attention to detail.

The U.K. is moving toward the second stage of its bailout plan for its economy, a formula the government said could have the right ingredients to get the mortgage market going again.

The problem is this optimism doesn't reflect what's really happening. For instance, just last week the U.K. property Web site Rightmove's latest index showed house prices in mid-January fell 1.9% on the month - the eighth straight monthly decline - and 7.3% on the year. The annual drop was the largest since the survey's inception in August 2002, with the previous record decline being 7.1% in November 2008.

The Council of Mortgage Lenders (CML) reported that gross mortgage lending reached an estimated £12.6 billion ($17.3 billion) in December, down 11% from £14.2 billion in November and 47% from December 2007 rates. December's is the lowest monthly figure since April 2001.

At the same time, U.K. housing minister Margaret Beckett said in an interview with The Times last week that another property boom might not be very far off. She also warned first-time homebuyers not to delay buying their homes in the hope of further house price falls, because "when the upturn comes, there will probably be a mad rush."

It's true that while the rapid rate of decline for U.K. house prices is depressing, the silver lining, according to Rightmove, might be that the country will reach its bottom far sooner than expected. What is also correct is that unless the banks budge, this mortgage stall won't go anywhere.

Even if a mad rush is to begin at some point in 2009, unless the credit is there to accommodate large demand, for now it's only buyers with good credit and large deposits that have access to bank lending.

The whole reason the subprime or nonconforming sector existed was to reach the segment of the population that was not prepared to provide a large chunk of money upfront. It could be that the new package of measures to support the financial system and invigorate new lending, unveiled by the government last week, might be stimulus to tip the balance in the right direction.

Under the new package, the government plans to provide full or partial guarantees to eligible, triple-A rated ABS backed by mortgages and by corporate and consumer debt.

Michael Coogan, director general of the CML, said that the package should help to restart the securitization market. The scheme might still be too tightly drawn since it's restricted to triple-A-rated securities, and excludes non-deposit-taker lenders; however, the extension on the discount window facility is helpful and might partially offset the potential problems that would otherwise have emerged from ending the Bank of England's Special Liquidity Scheme.

Any stimulus to lending can only be a good thing, but taking a giant leap of faith such as what the U.K. housing minister has done is unusual in these uncertain times. For one, the full details on the new scheme have yet to come out. And judging by the shocks that have stunned on the world's economies thus far, the road to April - when the scheme will start, subject to state aid approval - is a long one that might be paved with a myriad of new obstacles.

It's probably too soon to predict how the new interventions may impact lending levels in 2009.

(c) 2009 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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