Saturday, Aug 25, 2007
Cracks or major fault lines benig revealed?
Firstrung: Sub prime mortgage lending beginning to crack
"It's a sign of the times that the Bank of England has been forced to use its position of lender of last resort and offer a helping hand, granting a £314m loan at 6.75% to an unidentified lender". "While its a little too early, for the prime mortgage market to be affected by the stock market turmoil, the sub prime sector is beginning to show cracks. Victoria Mortgages has withdrawn its sub prime range, GMAC-RFC increased rates by 0.75%, Mortgages Plc increased rates by up to 1% and Northern Rock by up to 0.55%. SALT will no longer considering applications from borrowers with any arrears in the last three months.
Posted by converted lurker @ 08:03 AM (616 views) Add Comment
8 Comments
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1. planning4acrash said...
Phew, not allowing any applications from people with arrears? Those who can't pay, won't get a new fixed rate and will have to shop further or end up on the standard variable rate, ouch.
2. paul said...
Why does the lender borrowing £314m retain anonymity? Surely the Bank of England (being a government institution) is answerable under the Freedom of Information Act to disclose the lender.
I can't get anonymous loans. Why can private companies now?
3. paul said...
Still, I suppose it breeds rampant speculation as to the identity and therefore breeds uncertainty.
The Bank of England are numpties.
4. Tickock said...
planning4,
That is absolutely right. I have several friends who have bought recently on 2yr fixed rate, 100% mortgages, who may well be considered 'sub-prime' by lenders.
When I asked what rate their mortgages 'reset' to after the 2 yr. period, the common response was, "who cares, we'll refinance with another lender when it expires".
This is the advice they were given by their 'independent financial adviser's' (whose shiny polyester suit and gold tooth smile somehow managed to reasure them they really could afford it after all)
5. Tickock said...
Paul,
Word on the street is that the borrower was Barclays.
6. Scott said...
It is Barclays
7. paul said...
BZW?
Shit that's bad. Now I understand why private investors are withdrawing from the UK savings market.
8. wiltshire said...
Just to add another perspective -
"Under normal market conditions, a commercial bank tapping into the Bank of England's credit facility for a relatively small amount to balance its books at the end of a trading day would not have created much attention, say analysts.
This financing option is generally used a few times a month. As it is an emergency facility, it attracts a higher rate of interest - 1% above the base rate.
It is believed that the bank's emergency loan was not connected to the problems affecting much of the financial system.
But the spat reflects the fragile confidence in global credit markets, which have suffered as a record number of US homeowners with poor credit or on low incomes have been unable to afford to repay mortgages which they first took out when interest rates were much lower."
http://news.bbc.co.uk/1/hi/business/6960171.stm