Bank of England Makes Radical Lending Move
April 21, 2008
The Bank of England today announced a radical new plan to help ease the credit crunch by loaning Banks £50 billion.
It announced it would allow banks to trade mortgage-backed bonds, whose deal has become problematic, for specially-issued Treasury bills. This would result in the freeing up of banks’ balance sheets, making it possible for them to lend mortgages to more to households challenged by rapidly diminishing mortgage options and property values.
The swaps are available only for assets existing at the end of 2007, and new loaning cannot be faciliatated by them.
Banks have applauded the Bank of England’s “innovative and unequaled policy response”, and are surefooted that the move will enable them to lend mortgages to more to consumers and home buyers.
Chancellor Alistair Darling has declared that this move is necessary to keep more damage to the United Kingdom economy occuring as a result of the credit crisis, and will provide more details of the plan to MPs in the House of Commons subsequently this week.
BoE Governor, Meryn King, was quoted by Reuters as saying: “The Bank of England’s scheme will lift confidence in financial markets while ensuring that the stake of losses on the loans they have made remains with the banks.”
Popularity: 17%
HBOS Increases Mortgage Rates Despite Brown Appeal
April 16, 2008
Despite calls from Gordon Brown to lenders to follow the Bank of England’s rate cut, HBOS has increased mortgage interest rates on a range of its two year fixed rate deals.
The move by the country’s biggest mortgage lender came only hours after a meeting between UK’s top bankers and the Government.
Industry experts said this interest rate increase proves that mortgage lenders are being unable to handle the demand and demonstrate a lack of belief between banks and the Government.
Popularity: 9%
CML Says Mortgage Lending Will Half in 2008
April 11, 2008
The Council of Mortgage Lenders (CML) reported that mortgage lending could fall by half this year unless the Bank of England releases more money to the mortgage lenders.
Steven Crawshaw, the chairman of the CML, said the demand for property has decreased considerably nonetheless, “potential borrowing still significantly exceeds the industry’s collective capacity to supply funds”.
A large number of mortgage lenders were forced to withdraw mortgage deals and up the prices as result of the credit crunch, and according to Mr Crawshaw it will not get better unless lenders find a new source of funding.
Without attracting new funding sources we will see an ongoing process of attrition in mortgage choice - possibly over a protracted period - with lenders managing down demand by tightening lending criteria, increasing price, or withdrawing more products from the market altogether.
This is not lender specific but across the piece - large and small; specialist and mainstream; Plc and mutual.
Yesterday the Bank of England cut the base rate by 0.25 per cent, which was predictable, is spite of this many lenders have increased their mortgage interest rates.
Last week, First Direct became the biggest lender to withdraw entirely from offering new mortgages, and several small building societies have also been forced to close their doors to new business.
Many lenders have also tightened criteria, pulling 100% mortgages and making their best deals available to those with the largest deposits.
Popularity: 10%
Halifax to Raise Mortgage Rates
April 4, 2008
Halifax has announced that will raise mortgage rates for customers with smaller savings, starting from next Monday.
Homeowners who haven’t saved at least 25 per cent of the value of their property will pay 0.14 per cent extra, on top of the main interest rates.
In the other hand Halifax will encourage borrowers into putting down bigger deposits by reducing the rates by 0.1 per cent if they have a deposit of 25% or more.
In contradiction to rumours that Halifax was about to follow rival First Direct and stop borrowing to first time buyers. Halifax has revealed that will launch a range of mortgage deals for first time buyers, including a five year fixed rate deal at 5.69 per cent for 90 per cent of the property value.
Popularity: 9%
RBS Increases Minimum Deposits
March 31, 2008
Royal Bank of Scotland and Natwest are to increase the minimum size of deposits that landlords must pay from 15 to 25 per cent of a property’s value from the end of today.
The banks, which previously lent up to 85 per cent of a buy-to-let property’s value, said the move was a defensive measure to try and protect the service whilst they are receiving record volumes of mortgage applications.
Popularity: 14%