Londim
03-04-2008, 11:34
http://news.bbc.co.uk/1/hi/business/7325692.stm
More banks have withdrawn mortgage deals following First Direct's decision to suspend its entire range.
The bank, which is part of HSBC, said the withdrawal was to allow it to cope with the unprecedented demand for its range of mortgages.
The Co-operative Bank appears to have had the same problems and has withdrawn its two-year mortgage deals.
The US investment bank Lehman Brothers is also withdrawing from the UK mortgage market.
Its Southern Pacific and Preferred Mortgages will stop taking new business at the end of the day.
Temporary
First Direct stressed that it is only temporarily ending mortgage offers to people who are not already its customers.
Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.
First Direct says applications have been five times its usual levels.
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from people who are not existing customers," said First Direct chief executive Chris Pilling.
We want to be back in the market as soon as possible
Chris Pilling, First Direct
Mortgage approvals at new low
"Rather than increase interest rates dramatically to discourage new applications, we've decided to withdraw temporarily from offering mortgages to non-customers until we've cleared the backlog."
Products withdrawn
According to Moneyfacts, mortgage products on offer have fallen by 20% over the last week.
It's clear that people will flock to any lenders still able to offer attractive rates
Richard, Finchampstead
Your comments on First Direct
As a result of the continuing credit crisis, the interest rates at which banks lend money to each other are, unusually, far above the Bank of England's base lending rate.
And the banks are finding it much more difficult to raise money from credit markets for mortgage-backed securities.
That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.
Figures on Wednesday showed the number of new mortgages approved for house purchase fell slightly in February to just 73,000. This figure was 39% lower than the same month a year earlier.
Raising rates
First Direct is the first bank to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.
Last week, the Nationwide building society, one of the UK's biggest mortgage lenders, raised its interest rates significantly on new fixed and tracker deals.
It said this was both because of the increased cost of raising the funds and the need to cope with demand.
Many other lenders are demanding bigger deposits with mortgages of 100% or more of a property's value having all but disappeared.
More remortgaging
Although the number of first-time buyers and other house movers has been falling, more than a million people will see their short term fixed rate deals expire this year.
As a result, they are starting to look around to find a better deal from other lenders, as well as their existing one.
The situation has been made worse by the near-collapse of the Northern Rock.
What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards
David Hollingworth, London and Country
What was the UK's busiest lender last year has now withdrawn from the market, leaving many of its customers looking for another lender.
'Leap-frogging'
David Hollingworth, of the mortgage brokers London and Country, said First Direct had taken a drastic step to cope with demand.
"It's been topping the best-buy tables for quite some time now. As a consequence, they have been clearly attracting a lot of interest from borrowers," he said.
"What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards. That leaves another lender exposed to being very competitive and they receive a deluge of new business.
"That's what has been driving up rates in recent months," he added.
http://news.bbc.co.uk/1/hi/business/7328031.stm
The squeeze on the availability of mortgages is expected to continue in the next three months, the Bank of England has warned.
But it also predicted that demand for home loans was likely to fall slightly during the same period.
The Bank, in its Credit Conditions Survey, said lenders expected the rate of homeowners defaulting to rise.
Mortgage lenders have been raising the cost and availability of mortgages in recent days owing to the credit crunch.
Survey's finding
The survey confirmed that lenders had reduced the availability of mortgages in the three months to mid-March and "expected a slightly larger reduction" over the next three months.
But lenders are also expected to cut the amount of ordinary loans, not secured against property, in the next three months.
Small businesses were also expected to feel the squeeze, with a slightly smaller fall in corporate credit on offer.
Vicky Redwood, of Capital Economics, said the evidence increased the chances of the Bank's Monetary Policy Committee cutting interest rates next time.
"The outlook for economic growth has deteriorated enough to prompt a rate cut next week," she said.
http://news.bbc.co.uk/1/hi/business/7326816.stm
Fed boss says recession possible
Ben Bernanke
Mr Bernanke is testifying to the Joint Economic Committee of Congress
Federal Reserve boss Ben Bernanke has warned that US gross domestic product (GDP) could contract in the first six months of 2008.
"It now appears likely that real GDP will not grow much, if at all, over the first half of 2008 and could even contract slightly," he told Congress.
Two consecutive three-month periods of negative growth is generally accepted as the definition of a recession.
He did not say "recession", but it is the closest he has come to doing so.
Mr Bernanke is beginning two days of testimony to the US Congress, where he is likely to quizzed on the Fed's rescue of Wall Street investment bank Bear Stearns, which got into trouble because of its exposure to sub-prime loans.
Significant strains
The Fed chairman said that despite the rescue, "financial markets remain under considerable stress".
"The capacity and willingness of some large institutions to extend new credit remains limited,” he added.
When asked by the committee whether he thought there would be a recession, he said, "recession is possible".
But he added that it would take as much as two years to determine whether the economy technically was in recession, based on an the judgement by the non-profit economic research institute, the National Bureau of Economic Research (NBER).
The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months".
Optimism on future growth
Mr Bernanke predicted that the tricky first half of 2008 would be followed by an upturn in the second half of 2008 and throughout 2009.
That will be helped by the cuts in interest rates that have already been made and the government's $168bn (£85bn) stimulus package, which will give tax rebates to individuals and tax breaks to businesses in the summer.
The Federal Reserve's interest-rate setters begin their next two-day meeting on 29 April.
Rates have already been reduced to 2.25%, a drop of more than half since August 2007.
Bear Stearns
Asked about the treatment of Bear Stearns, Mr Bernanke said that the Federal Reserve had helped JPMorgan Chase buy its struggling rival in order to avert a "chaotic" situation.
"We did what we did because we felt it was necessary to preserve the integrity and viability of the American financial system, which in turn is critical for the health of the economy," he said.
Members of the committee questioned why a big financial institution should be helped more than struggling homeowners.
"We did not bail out Bear Stearns," he said. "Bear Stearns shareholders took a very significant loss.
"I don't think any company is interested in repeating the experience of Bear Stearns."
So with all this going on, it seems we're all in for a rough couple of months regarding spending and borrowing. So are you going to make cuts to your budget?
I will be with what little money I currently have, I won't be buying any luxury goods (CD's, DVD's etc.)
More banks have withdrawn mortgage deals following First Direct's decision to suspend its entire range.
The bank, which is part of HSBC, said the withdrawal was to allow it to cope with the unprecedented demand for its range of mortgages.
The Co-operative Bank appears to have had the same problems and has withdrawn its two-year mortgage deals.
The US investment bank Lehman Brothers is also withdrawing from the UK mortgage market.
Its Southern Pacific and Preferred Mortgages will stop taking new business at the end of the day.
Temporary
First Direct stressed that it is only temporarily ending mortgage offers to people who are not already its customers.
Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.
First Direct says applications have been five times its usual levels.
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from people who are not existing customers," said First Direct chief executive Chris Pilling.
We want to be back in the market as soon as possible
Chris Pilling, First Direct
Mortgage approvals at new low
"Rather than increase interest rates dramatically to discourage new applications, we've decided to withdraw temporarily from offering mortgages to non-customers until we've cleared the backlog."
Products withdrawn
According to Moneyfacts, mortgage products on offer have fallen by 20% over the last week.
It's clear that people will flock to any lenders still able to offer attractive rates
Richard, Finchampstead
Your comments on First Direct
As a result of the continuing credit crisis, the interest rates at which banks lend money to each other are, unusually, far above the Bank of England's base lending rate.
And the banks are finding it much more difficult to raise money from credit markets for mortgage-backed securities.
That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.
Figures on Wednesday showed the number of new mortgages approved for house purchase fell slightly in February to just 73,000. This figure was 39% lower than the same month a year earlier.
Raising rates
First Direct is the first bank to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.
Last week, the Nationwide building society, one of the UK's biggest mortgage lenders, raised its interest rates significantly on new fixed and tracker deals.
It said this was both because of the increased cost of raising the funds and the need to cope with demand.
Many other lenders are demanding bigger deposits with mortgages of 100% or more of a property's value having all but disappeared.
More remortgaging
Although the number of first-time buyers and other house movers has been falling, more than a million people will see their short term fixed rate deals expire this year.
As a result, they are starting to look around to find a better deal from other lenders, as well as their existing one.
The situation has been made worse by the near-collapse of the Northern Rock.
What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards
David Hollingworth, London and Country
What was the UK's busiest lender last year has now withdrawn from the market, leaving many of its customers looking for another lender.
'Leap-frogging'
David Hollingworth, of the mortgage brokers London and Country, said First Direct had taken a drastic step to cope with demand.
"It's been topping the best-buy tables for quite some time now. As a consequence, they have been clearly attracting a lot of interest from borrowers," he said.
"What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards. That leaves another lender exposed to being very competitive and they receive a deluge of new business.
"That's what has been driving up rates in recent months," he added.
http://news.bbc.co.uk/1/hi/business/7328031.stm
The squeeze on the availability of mortgages is expected to continue in the next three months, the Bank of England has warned.
But it also predicted that demand for home loans was likely to fall slightly during the same period.
The Bank, in its Credit Conditions Survey, said lenders expected the rate of homeowners defaulting to rise.
Mortgage lenders have been raising the cost and availability of mortgages in recent days owing to the credit crunch.
Survey's finding
The survey confirmed that lenders had reduced the availability of mortgages in the three months to mid-March and "expected a slightly larger reduction" over the next three months.
But lenders are also expected to cut the amount of ordinary loans, not secured against property, in the next three months.
Small businesses were also expected to feel the squeeze, with a slightly smaller fall in corporate credit on offer.
Vicky Redwood, of Capital Economics, said the evidence increased the chances of the Bank's Monetary Policy Committee cutting interest rates next time.
"The outlook for economic growth has deteriorated enough to prompt a rate cut next week," she said.
http://news.bbc.co.uk/1/hi/business/7326816.stm
Fed boss says recession possible
Ben Bernanke
Mr Bernanke is testifying to the Joint Economic Committee of Congress
Federal Reserve boss Ben Bernanke has warned that US gross domestic product (GDP) could contract in the first six months of 2008.
"It now appears likely that real GDP will not grow much, if at all, over the first half of 2008 and could even contract slightly," he told Congress.
Two consecutive three-month periods of negative growth is generally accepted as the definition of a recession.
He did not say "recession", but it is the closest he has come to doing so.
Mr Bernanke is beginning two days of testimony to the US Congress, where he is likely to quizzed on the Fed's rescue of Wall Street investment bank Bear Stearns, which got into trouble because of its exposure to sub-prime loans.
Significant strains
The Fed chairman said that despite the rescue, "financial markets remain under considerable stress".
"The capacity and willingness of some large institutions to extend new credit remains limited,” he added.
When asked by the committee whether he thought there would be a recession, he said, "recession is possible".
But he added that it would take as much as two years to determine whether the economy technically was in recession, based on an the judgement by the non-profit economic research institute, the National Bureau of Economic Research (NBER).
The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months".
Optimism on future growth
Mr Bernanke predicted that the tricky first half of 2008 would be followed by an upturn in the second half of 2008 and throughout 2009.
That will be helped by the cuts in interest rates that have already been made and the government's $168bn (£85bn) stimulus package, which will give tax rebates to individuals and tax breaks to businesses in the summer.
The Federal Reserve's interest-rate setters begin their next two-day meeting on 29 April.
Rates have already been reduced to 2.25%, a drop of more than half since August 2007.
Bear Stearns
Asked about the treatment of Bear Stearns, Mr Bernanke said that the Federal Reserve had helped JPMorgan Chase buy its struggling rival in order to avert a "chaotic" situation.
"We did what we did because we felt it was necessary to preserve the integrity and viability of the American financial system, which in turn is critical for the health of the economy," he said.
Members of the committee questioned why a big financial institution should be helped more than struggling homeowners.
"We did not bail out Bear Stearns," he said. "Bear Stearns shareholders took a very significant loss.
"I don't think any company is interested in repeating the experience of Bear Stearns."
So with all this going on, it seems we're all in for a rough couple of months regarding spending and borrowing. So are you going to make cuts to your budget?
I will be with what little money I currently have, I won't be buying any luxury goods (CD's, DVD's etc.)