Banks seek to calm nerves as shares fall
Britain's leading banks were forced to reassure investors that they were in sound health yesterday after shares in Bradford & Bingley fell 24 per cent amid concerns about its future. HBOS, the parent company of Halifax and Alliance & Leicester, saw its shares fall heavily despite both banks assuring investors that they had plenty of funds. A total of £2.77 billion was wiped off the value of Britain's six biggest high street banks.
Source : John Watson, 03 Jun 2008
The buy-to-let boom goes bust
The first signs of a collapse in Britain's buy-to-let property market emerged yesterday as Bradford & Bingley, the UK's largest lender to private landlords, revealed a 50 per cent jump in arrears on its mortgage book over the first four months of the year. B&B, which represents 20 per cent of lending across the British buy-to-let sector, said the number of landlords who were three or more months behind on their mortgage payments had leapt by more than 52 per cent between January and the end of April, to more than 1.5 per cent of its total buy-to-let customer base. The picture was much worse within one of its books of business - which it acquired from the US lender GMAC-RFC in 2005 - where buy-to-let arrears were up almost 80 per cent to 3.5 per cent of the total.
Source : John Watson, 03 Jun 2008
Gloom deepens as lending slumps
Mortgage lending slumped to a new low last month, raising fears that the slowdown in the housing market could be sharper than expected. The number of home loans, seen as a key barometer of future conditions in the housing market, fell to a record low of just 58,000 in April, down from 64,000 in March and 113,000 in April last year. This is the lowest figure since records began in 1993. The dire state of the mortgage market was highlighted further by Bradford & Bingley, Britain’s biggest buy-to-let lender, which reported a sharp rise in the number of borrowers in arrears. The bank, which issued a profit warning after raising emergency funding by selling part of its business, said that the number of borrowers who had missed three or more monthly payments jumped by 36 per cent between the end of December and the end of April. Bradford & Bingley’s travails will be a further blow to landlords. All mortgage rates have spiralled recently as lenders strive to protect their income during the credit crunch.
Source : John Watson, 03 Jun 2008
One million families facing negative equity
Falling house prices will push almost one million homeowners into negative equity by the end of next year, according to a report yesterday. By the end of this year 250,000 could find the value of their home is less than the size of their mortgage, it said. The U.S.-based bank Citigroup, which produced the report, said the number of homeowners in negative equity at the moment is a 'modest' 35,000. However, property prices could fall by 15 per cent, or possibly more, by the end of 2009. Its chief UK economist, Michael Saunders, said that if this forecast is correct, almost one million homeowners will be in negative equity.
Source : John Watson, 02 Jun 2008
Concern heightens over UK mortgage losses
In past years, one of the most common refrains heard from British bankers dealing with mortgage products was: We don't have subprime here. For while the US has been reeling from huge unexpected losses on so-called subprime loans those extended to borrowers with poor credit histories bankers in Britain have generally insisted that the UK was unlikely to suffer such a similarly large wave of losses since there were key differences between the two housing markets. These days, however, the level of concern about UK mortgage losses is starting to rise.
Source : John Watson, 02 Jun 2008
Crunch-hit consumers turning to store cards
Shoppers are relying on store cards or reverting to cash as they try to keep their heads above water, says Debenhams chief executive Rob Templeman. 'We are seeing a lot more cash purchases and the number of store card transactions is moving up,' he said. 'There is a definite trend away from credit cards, and my suspicion is customers are using them to pay their everyday bills.' His comments come as a poll by GfK NOP showed consumer confidence had fallen to a low last recorded in the 1990 recession amid falling house prices and rising household costs.
Source : The Observer 1.6.08 - page M1. 01 Jun 2008
High price of a remortgaged retirement
While most parts of the property market have gone into a slump, there is one area that still seems to be booming - equity release. During the course of 2008, there could well be an increase of 10 per cent in the numbers of pensioners getting access to cash by releasing the equity in their homes, according to one of the market leaders, Norwich Union. Lending via equity release is seen as being far less risky than most normal mortgage lending, so, even in a credit crunch, the figures stack up well for lenders. But while many people will be satisfied with the results of taking out one of these plans, there are some problems. The Financial Ombudsman Service dealt with 42 complaints last year - a useful indication of the kind of problems that could present themselves in far greater numbers in years to come.
Source : The Observer 1.6.08 - page M16. 01 Jun 2008
Bank set to keep base rate at 5%
Homeowners are likely to get little respite from high borrowing costs this week, with City economists predicting that the Bank of England will keep interest rates on hold when its rate-setting Monetary Policy Committee meets on Thursday. The committee is expected to keep rates at 5 per cent despite calls for cuts to revive the economy, which many think teeters on the edge of recession. Michael Taylor, senior economist at Lombard Street Research, said he expected rates to be kept on hold at 5 per cent for the rest of the year, constrained by rising inflation.
Source : The Independent on Sunday 1.6.08 - page B3. Also reported in The Sunday Express page F2 and The Mail on Sunday page 57. 01 Jun 2008
Banks target of price-fixing investigation
The Office of Fair Trading (OFT) is investigating both Royal Bank of Scotland and Barclays over allegations of price fixing. Concentrating on loans made to professional services companies, the investigation into alleged anti-competitive practices covers only a very specific area of the loans market and not more widely available consumer products. Having been directly notified by Barclays about inappropriate advances to its professional services team, the OFT launched its inquiry. Confirming that it was still in the early stages of its investigation, an OFT spokesperson said: "The OFT will not be in a position to conclude whether the law has in fact been infringed until it has completed its investigation and assessed the available evidence." Both the lenders involved have pledged their full cooperation to the regulator.
Building societies see record deposits in April
April saw the UK's building societies attract over £1,820 million in new savings, with much attributed to the rise in the personal ISA allowance. The rise in the amount saved, up from £1,351 in April last year, comes as savers are increasingly looking for a secure home for their savings. The statistics released by the Building Societies Association (BSA) reveal that whilst savings are up gross lending remained roughly the same at £3,645 million in April 2008, compared with £3,768 million in April 2007. Adrian Coles, director-general of the BSA said: "Savers are increasingly recognising the very competitive saving products that building societies offer represent excellent homes for their cash in these uncertain economic times."
02 Jun 2008
Four percent base rate predicted by next year
Howard Archer, the chief European and UK economist for Global Insight has predicted that the Bank of England base rate will drop to around 4% by the end of 2009. With the base rate currently standing at 5%, this will come as welcome news to homeowners struggling with higher mortgage repayments. Whilst stating that the monetary policy committee will tread carefully for the time being, he concludes that once evidence of wage moderation is seen, interest rates will fall. Speaking on his assertions, Howard Archer said: "Interest rates could eventually fall as low as four per cent in 2009, but it will be a gradual process."
02 Jun 2008
Bradford and Bingley confirm losses
The UK's biggest buy-to-let lender has confirmed eight million pounds of pre-tax losses in the first four months of this year. Compared with profits of around £108 million the same time last year, the beleagued lender blamed it on borrowers struggling to repay loans secured on rental properties. News that it is also selling a 23% stake to US firm Texas Pacific Group follows its recent announcement to launch a rights issue to help bolster its finances. Commenting on the trading statement, executive chairman Rod Kent said: "This is a disappointing trading update reflecting a more difficult market environment. I understand shareholders' disappointment."
02 Jun 2008
Banks target of price-fixing investigation
The Office of Fair Trading (OFT) is investigating both Royal Bank of Scotland and Barclays over allegations of price fixing. Concentrating on loans made to professional services companies, the investigation into alleged anti-competitive practices covers only a very specific area of the loans market and not more widely available consumer products. Having been directly notified by Barclays about inappropriate advances to its professional services team, the OFT launched its inquiry. Confirming that it was still in the early stages of its investigation, an OFT spokesperson said: "The OFT will not be in a position to conclude whether the law has in fact been infringed until it has completed its investigation and assessed the available evidence." Both the lenders involved have pledged their full cooperation to the regulator.
02 Jun 2008
Barclays cuts overdraft charges
Barclays Bank has announced it will cut the fee it charges to customers who go overdrawn without prior permission. Barclays is the first bank in the UK to announce such an amendment to its unauthorised overdraft charges, which will see them reduce from £35 to just £8. As part of a wider change to its overdraft policy, customers will be able to arrange a personal reserve of between £250 and £1,500 for a one off fee of £22. Speaking on the decision, Chris Walker from Which? Magazine said: "This does seem to be an admission by Barclays that its current unauthorised overdraft charges are unfair and that instead, a fee of £8 would reflect its costs and so be a much fairer price."
01 June 2008
Struggling home owners urged to act quickly
Home owners who are struggling to make their monthly mortgage repayments are being urged to seek advice sooner rather than later. In an announcement by the Financial Services Authority (FSA) that it was expanding its consumer campaign to help people stay in control of their mortgage, mortgage holders in arrears were urged to act before it was too late. The FSA has produced a checklist for people who may be struggling with their monthly payments which includes practical advice for mortgage holders. Chris Pond, Director of Financial Capability said: "Our checklist helps people plan for the best but prepare for the worst. It is designed to help ensure they have access to impartial information on what they can do to safeguard their home if things get tough."
01 June 2008
Northern Rock expand debt management team
The nationalised bank Northern Rock is to double the size of its debt management department over the course of the next year. The proposal to increase the number of staff in the department from 176 to 444 suggests the bank is expecting an increase in the number of customers who will experience difficulty in making their monthly repayments. The redeployment of staff is part of a larger restructuring plan which could potentially see over 2,000 people being made redundant over the next three years. The details of this plan, which came to light after an internal communication was leaked to the BBC, could change following union consultation, Northern Rock said.
01 June 2008
Intermediaries play vital role in mortgage market
Financial advisers and mortgage intermediaries have been instrumental in the development of a competitive mortgage market, says the Intermediary Mortgage Lenders Association (IMLA). Commenting on the Association of Mortgage Intermediaries report on the value of mortgage advice, IMLA reiterated the report's findings that intermediaries play a vital role in helping clients find the right mortgage package. Peter Williams, IMLA's executive director, commented: "Looking back 20 years, mortgages were largely the domain of building societies and the limited availability of funds often meant home loans were effectively rationed to the consumer." Roughly 75% of all mortgage applications now originate from the intermediary sector, compared with around 25% in 1988.
01 June 2008
Mortgage deals around for less than two weeks
The time that new mortgage deals are available for has dropped to just 11 days from around 30 days last year, according to a study conducted by moneyfacts.co.uk. Lenders are pulling their best rates 30% faster than this time last year with some disappearing within just six days. Speaking on its findings, Darren Cook, Head of Press at Moneyfacts.co.uk said: "Lenders with products available are experiencing unprecedented levels of demand, which impinge on their back room staff's ability to cope and on the company's capacity to provide a good level of service. To avoid this, lenders are choosing to withdraw their products quicker than before in order to clear their demand bottlenecks."
01 June 2008