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'Another 18 months of crunch'

• Robert Peston
• 6 Sep 08, 12:00 AM

The credit crunch won't end till US house prices start to rise again, and that could take 18 months, says the chief executive of , the UK's leading mortgage provider.

In his first ever broadcast interview, Andy Hornby - whose bank owns the and - says British banks will continue to suffer serious difficulties lending to homeowners and companies until they can once again raise significant sums on wholesale financial markets.

He says that two-thirds of wholesale funding traditionally received by UK banks comes from overseas, with the bulk of that coming from the US. And he fears that these US money-market investors won't resume the channelling of money to UK banks for mortgage-lending until US house prices start to recover.

Speaking to me for my series of interviews with business leaders, Leading Questions, Mr Hornby says: "my personal view, for what it's worth, is that it will take 18 months to play through the system because it's going to take 18 months before US house prices have started to rise again - which is what's required for banks to have the confident to start lending again.

It will take a long time to play out."

His assessment implies that there's very little the Government can do to persuade our banks to start providing more normal quantities of loans to homebuyers and businesses.

And since it was the reduction in the availability of credit that precipitated the economic slowdown in the UK, Mr Hornby also implies that there's little the Government can do to restore positive momentum to the economy - although he's adamant that all initiatives are welcome.

A prime cause of the credit crunch, as manifested in the UK, was that - arguably - they became too dependent on selling their mortgages to global investors in the form of mortgage-backed securities: by 2006, such funding provided two-thirds of net new mortgage lending in the UK.

So the sudden boycott of these securities which started in the summer of 2007 deprived our banks of much of the finance they needed - and in the case of , the boycott destroyed its viability, leading eventually to its nationalisation.

The full interview, in which Mr Hornby defends the interest rates being charged by banks for the more limited amount of mortgage-finance they are providing, can be seen this Saturday and Sunday on Leading Questions, on . You can also click to see it.

Mr Hornby, who has always kept the lowest profile of all the banks' chief executives, also explains why he didn't resign after the banks' profits slumped and it felt obliged to tap its shareholders for 拢4bn of new capital.

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