Financial Crisis grows as troubled mortgage lender B&B closes it’s mortgage business
Article source: www.timesonline.co.uk
The mortgage market has suffered another blow as the bank of England announced it’s latest figures for overall mortgage lending show only a slight rise with the levels of new mortgages suffering there biggest set back since records began.
This announcement is the latest in a string of bad situations arising out of the depending world wide financial crisis. With much of the problems being based on stock market traders short trading and the much criticized sub-prime mortgage market. The latest consequences in the UK market being a reduction in the number of mortgage products on the market (a result of the reluctance of banks to lend to each other), the nationalization of Northern Rock, the take over of HBOS by Lloyds TSB and the announcement by Bradford and Bingley last week to make all of it’s in house mortgage advisors redundant. Over the water, this has been mirrored by the collapse of Lehman Brothers (the 4th largest banking institution in the world), and three other large financial institutions including AIG (the insurer) running into trouble.
In the UK market some of the problems have been linked to the shrinking property market, both in terms of value and available properties. The Goverments speculations surrouning the rasing of the stamp duty level to £175,000 and then there eventual confirmation is said to have done little to help the housing market by the council for mortgage lenders.
The growth figures from the Bank of England came amid the announcement that the trouble Bradford and Bingley was to close it’s mortage business to new business, be nationalised by the Government and have it’s savings business sold to the Spanish bank Santander (ower of the Abbey) for 612million. After the sale the Government is left with a £41 billion mortgage book.
The B&B mortgage assets were heavily geared towards buy-to-let and self certified mortgages, a fact which could prove fatal as house priced continue to fall. Many of these buy-to-let landlords could be faced with a negative equity situation (where the mortgage with worth more than the property) and rental incomes which are less than the monthly mortgage repayments. In addition many other landlords who are coming to the end of their fixed rate periods will also be twiddling their thumbs as BM Solutions, the buy-to-let lender owned by HBOS, increased its rates with further rate rises expected from companies like Nationwide.
Once piece of saving news from the troubled lender is that it will honor all mortgage offers that have already been made.
In the long term experts hope that the decision by B & B to close it’s buy-to-let business, the rationalising taking place in the market (take over of HBOS by Lloyds) and the impending American federal government deal to buy mortgage assets worth $700 billion will help to stabilise a global financial market on the brink of a huge recession. In the short terms at least it is hoped that the B & B move will help to stabilise the UK housing market.
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