UK mortgage lenders have to get ready for the likelyhood of the global credit crunch getting much worse. According to the Financial Services Authority (FSA), a tougher global financial situation has the possibility of affecting the whole UK mortgage market, in turn enhancing defaults.

UK mortgage lenders have to get ready for the likelyhood of the global credit crunch getting much worse. According to the Financial Services Authority (FSA), a tougher global financial situation has the possibility of affecting the whole UK mortgage market, in turn enhancing defaults.

The access to cash could get more difficult and this is a problem that caused the run earlier this year on Northern Rock. According to the City watchdog, lenders required contingency plans for being shielded against the worst outcomes.

The FSA has also made it clear to the lenders that in spite of the liquidity and the credit risks, it was vital for the lenders to maintain their focus on treating the customers fairly; this will be including the treatment of customers in arrears. The FSA has also confirmed that there were signs of the market changing.

Clive Briault, the FSA's retail managing director has declared in the Council of Mortgage Lenders' annual conference, that there is a very real prospect of the conditions worsening further into the next year, and this will occur in terms of both credit risks and liquidity. He further added that the firms should be assessing their liquidity as well as funding positions, and also test whether their business models can withstand the volatility and the severe market problems.

Briault also suggested that the firms should be assessing and reviewing their medium and the longer-term strategies, the options that are open to them and consider the contingency plans against the worst outcomes. According to him, the target is to have a competitive and thriving mortgage market in the UK, which will be catering to the requirements of the customer clearly.