Archive for the ‘Mortgage News’ Category

Slump In UK Mortgage Lending

Thursday, September 25th, 2008

Problems at HBOS and Bradford & Bingley increased with the news of UK Mortgage approvals falling to a new low in August this year. Worries were already in with HBOS not doing too well and doubts over Lloyds TSB deal going through. It was also hit by the news of a possible US bailout. The decline gathered momentum with the announcement of UK houses prices dipping to 64% which is lower than last year. So, the impact felt on HBOS is more as it is down to 189.5p which is almost a fall of 9%. Bradford & Bingley were also down to 24.25p which is down by 14%. With Deutsche Bank moving from holding to selling and a cut in its price target to 45p from 65p, Trinity Mirror has fallen to 102.75p. Tate & Lyle also lost 55p after a judgement on a patent dispute involving Chinese sucralose importers and manufacturers went against their favour. The picture is also grim with pub companies after Mitchells & Butlers pointed towards increasing costs in areas of food and energy, employment and duty. They also warned of an additional expenditure of 3% to maintain profits at this year’s level. Mitchells & Butlers fell to 243.75p while Punch Taverns faced a dip of 25p.

British Banks Special Liquidity Scheme

Monday, September 22nd, 2008

UK banks have swapped about £100bn of securities which were mortgaged for Treasury bonds. This is however more than the amount which was originally expected to be swapped claims Alistair Darling. This statement by Mr Darling reveals the degree of exposure of the taxpayers in the Mortgage market under the “special liquidity scheme” (SLS) of Bank of England which opened in April this year. The liquidity scheme is a successful way of providing liquidity to the British market and also compatible to the US plan. Though nothing has been stated about the number of mortgage-backed securities which could be swapped for government papers, yet the banks have been using this service to increase liquidity. However, though the service has been given an AAA-rate, taxpayers still have a margin of risk. This facility which was supposed to continue till October has been extended till January as it helped maintain a stability of the banks despite the turmoil experienced on the Wall Street. The Bank of England was in a position to use its discretion either to accept or reject applications of banks wanting to borrow under this scheme. About £90bn of mortgage- backed securities were introduced which would be placed under the scheme. The central bankers’ bank stated an increase in the mortgage securitisation in the second quarter.

Lehman Mortgage Assets Up For Sale

Monday, September 15th, 2008

Lehman ready to sell assets worth £2.3bn

Mortgage assets worth £2.3bn of Lehman Brothers are now up for grabs by BlackRock Financial Management. Talks have begun between the two parties after Lehman Brothers decided to retreat from residential mortgages.

The assets which BlackRock Financial Management has decided to buy were raised primarily through UK sub-prime lending groups like London Personal Loans (LPL), Southern Pacific Mortgages (SPML), London Mortgage Company (LMC), Southern Pacific Personal Loans (SPPL), and Preferred Mortgages. Customers having “unlimited adverse” profiles and those even in the prime bracket were offered an array of mortgages and secured loans. However, Lehman was not willing to disclose much about the assets they were planning to sell to BlackRock Financial Management. A press spokesperson said that they were not ready to reveal further deals regarding the deal as it is between the two parties to be completed by the fourth quarter. However, in the financial market, the dealings were as transparent as it could be. This move was made public after speculations that Lehman was finding hard to raise capital. Ilehman Brothers stated that it was trying to reduce its dealings with “commercial real estate” and “residential mortgages.”

Rescuing Fannie And Freddie Temporary Solution For British Mortgage Market

Wednesday, September 10th, 2008

Rescuing Fannie and Freddie is a temporary solution for British mortgage market

US Treasury Secretary, Henry Paulson’s decision to take rescue manage UK giants Fannie (Federal National Mortgage Association) and Freddie (Federal Home Loan Mortgage Corporation) would offer little respite to homeowners of Britain. Even though the industrial average of Dow Jones moved up by 129 points this strategy of the US Government will not be a quick fix solution for the ailing Mortgage market of Britain.

In Britain too shares in house builders and fund managers soared. Barclays was the most profitable among banks with share prices increasing by 12 per cent to 355p while share prices of Cattles climbed to 125 p up by 13.6 per cent. ?

In spite of these figures, experts feel that there would hardly be any sudden results coming from the takeover of two British giants though stability of the American housing market would have an incidental benefit for Britain. As a result of the stability, consumers would get time to value their property with more knowledge. The housing market would get a boost as banks would henceforth be more comfortable in lending individuals equipped with a better understanding of the credit assets. This operation by Henry Paulson is expected to benefit American lenders. Analysts have calculated that European financial companies have less hold on shares by Fannie and Freddie and therefore they would only be partially hit by the fall. However, these companies hold about $72 billion of Fannie Mae and Freddie Mac debt and mortgage-backed securities and many banks like Credit Suisse, Deutsche Bank and UBS do not divulge the exact details. A senior research analyst feels that the bailing out of the British companies would hardly help in improving the economic problems that Britain is currently reeling under. It does not do much for the self-created problems of the UK economy and therefore the banks of UK. The prices of houses are going to fall further with bank losses.

Bradford and Bingley Suffered Major Losses

Friday, September 5th, 2008

Bradford and Bingley In Most Trying Times

UK lender Bradford and Bingley suffered major losses in investment and writedowns and a setback 155 million pounds. By the end of 2007, debts were up by more than half according to the UK lender. It also send out warning signals to landlords that the condition would through 2008 as there would be a fall in profit margins. However, investors have some good news as they said that they would renegotiate one of the two agreements and also plans to renew contract with GMAC-RFC that improved arrears. The results of Bradford and Bingley no matter how appalling it might be were expected according to analysts. Bradford and Bingley were compelled to raise 400 million pounds in a cut-price cash call in the month of August as the market conditions deteriorated. The lender showed a pre-tax loss of 26.7 million pounds ($48.9 million) this year while last year the profits were 180.4 million. The losses on investments and underlying pre-tax profit amounted to 70.2 million pounds in the first six months of 2008.

Investors are keeping a close watch on the Mortgage book of B& B which comprises of loans given out to landlords. They are also looking at the deteriorating arrears across the whole of UK as there is a fall in property prices and consumers come under burden. The number of mortgages who were 3-4 months in debts worsened from 1.48 percent to 2.29 percent towards the end of last year. However, B&B has released a statement saying that it is doing its best to improve arrears and collection process. It also extended its agreement with Kensington to reduce the amount of loans in 2008 and 2009. So, in the present scenario, it will take only 1.3 billion pounds of loans in 2011 while it was initially supposed to borrow a further 1.15 billion of home loans. Though it was supposed to have talks with GMAC, it gave no further information. The image of Bradford and Bingley has suffered after sending out warning signals on profits and also the surprise exit of its CEO and TPG Capital pulling out of a stake purchase after receiving a bad credit from credit rating agency Moody. Though a new CEO has been appointed, Richard Pym, he said he would plan his strategy only in autumn.

Scottish Mortgage Better Than UK

Tuesday, September 2nd, 2008

Scottish mortgage market slighter better than its UK counterpart

The slowdown which the Scottish mortgage market is experiencing is however, not too harsh to the north of the border as revealed by the latest figures of Council of Mortgage Lenders, Scotland. There has been an 18 per cent rise in home loans in the second quarter of 2008 as compared to only 5 per cent in the rest of the UK. However, there has been a fall of 34 per cent from last year in the same quarter which is less than the UK decrease which is of 46 per cent. Though the mortgage lending showed signs of a downfall in the last quarter all across the UK from 2007 and has been falling constantly since then, in Scotland this fall has been less compared to the UK. Home purchase loans in the UK were at 8 per cent at the beginning of 2007 while that figure is now at 12 per cent. The number of first time buyers is also on the rise. The previous quarter witnessed a rise of 5 per cent which is however, lower by 31 per cent in the same quarter last year. Over the years, the lending conditions have increased and therefore first-time buyers with small deposits find it difficult to enter the field. A year ago, the average first time buyer deposit was 10 per cent while this year it is 13 per cent.

The average price of a house is relatively less compared to the UK house price and therefore mortgage is easily available in Scotland than in the rest of the UK. In Scotland, individuals took home loans for 2.88 times their income in the second quarter, compared to 3.12 across the UK. On an average a borrower in Scotland spends about 16.9 per cent of his income on paying off mortgage interests, compared to 18.1 per cent in the rest of UK.

The market of mortgage lending is definitely on the slowdown trail all over the UK due to paucity of funds but the slowdown is much less in Scotland according to CML chairman. According to other experts the market is very shaky at the moment and needs government support.