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Mortgage Market To Face Challenges Beyond 2010, Warns Moody's

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Banks and building societies also face ever more stringent capital and liquidity requirements which could further hit their ability to increase lending, Moody's Investor Service said.

The scarcity of wholesale funding will keep squeezing margins for many, further putting pressure on them to scale back on loans in 2010 and beyond, according to the credit agency.

In addition, arrears on home mortgages have so far been cushioned by very low interest rates and a relatively moderate rise in unemployment, but a rise in either rates or joblessness – forecast by many – would have a "significant impact" on loan performances.

"Moody's believes that the next few quarters will be characterised by a number of key credit themes that will culminate in sustained pressure on the sector's profitability," said Marjan Riggi, VP-senior credit officer. "We expect to see continued consolidation of weaker lenders into larger and stronger entities, thereby strengthening the system in the long run."

Moody's grouped lenders in the UK based on its view of their franchises' strength.

Bigger players like Santander, Nationwide and Co-operative Bank, which enjoy economies of scale and offer more diverse products, were viewed as best placed.

At the other end of the market were more vulnerable lenders such as building societies Newcastle and West Bromwich that lacked scale, said Moody's, adding that some in the group were also burdened with assets of questionable quality after rapid growth.

So somehow consolidating the weaker turds together will suddenly generate a quality super strength turd?

That's fantastic news.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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