Nine of Britain’s biggest building societies, including Nationwide, have had their credit ratings downgraded in anticipation of further pain to come in the UK housing market.
Marjan Riggi, Moody’s lead analyst for UK mortgage lenders, said that the action had been taken after stress-testing scenarios that incorporated a peak-to-trough decline in house prices of 40 per cent. Some building societies have been downgraded by three notches, making it more expensive for them to raise funding in the wholesale markets.
As well as Nationwide, Moody’s downgraded Chelsea Building Society, West Bromwich, Principality, Newcastle, Skipton, Yorkshire, Norwich & Peterborough and Coventry. Some are considering challenging their ratings with Moody’s.
At the same time, there are signs that the cost of borrowing for homeowners may have bottomed out, with Barclays set to increase the cost of fixed-rate mortgages despite the Bank of England leaving interest rates unchanged this month. Other lenders are expected to follow suit.
Barclays is pulling a 3.99 per cent four-year fixed-rate deal for borrowers with a 40 per cent deposit, from tomorrow. It is also increasing the costs of its three- and five-year fixes by up to 0.4 percentage points.
Woolwich, the mortgage arm of Barclays, blamed the decision on a rise in the cost of longer-term wholesale borrowing, which banks use to fund new mortgage lending.
The bank is the first big lender to increase rates since the cost of borrowing hit a historically low level at the beginning of February. Brokers see this as evidence that mortgage rates have no further to fall.
Melanie Bien, of Savills Private Finance, said: “It was only a matter of time before lenders starting edging up their longer-term fixes. Borrowers who have been trying to time the bottom of the market in terms of mortgage rates may be wise to secure a longer-term fix now.”
Source: The Times
Showing posts with label british economy. Show all posts
Showing posts with label british economy. Show all posts
Thursday, 16 April 2009
Wednesday, 15 April 2009
Halifax to rescue borrowers in negative equity with 120pc remortgages
One of Britain's biggest mortgage lenders is offering loans of as much as 120pc of the property value to existing customers coming to the end of their current deal.
HBOS, which is part of Lloyds Banking Group, will consider offering a new mortgage to customers in negative equity whose existing deal, such as a fixed rate, is about to expire.
Normally such borrowers would see the rate they pay revert to the lender's standard variable rate (SVR) and would be unable to remortgage if the new loan were greater than the current value of the property as a result of the decline in house prices.
Lenders are generally restricting loans to 95pc of the property value, while borrowers wanting the most competitive deals need to borrow no more than 75pc or even 60pc.
But Halifax and Bank of Scotland, which are both part of HBOS, are offering the rates on 95pc loans to some remortgage customers needing to borrow more than the property value – up to 120pc of the value in some cases.
"HBOS told us they were doing this [offering 'negative equity' loans] earlier this month for borrowers with up to 120pc LTV [loan to value] deals, although they also said that this would not be publicised anywhere," one mortgage broker told The Telegraph.
Brokers said they believed HBOS to be the only major lender offering this option to customers in negative equity.
Melanie Bien of Savills Private Finance said: "HBOS is doing the decent thing, ensuring that existing customers who are in negative equity can still get a fixed rate.
"With other lenders, such borrowers are stuck on the standard variable rate, which is fine when such borrowing is cheap – as it is at the moment. But rates are likely to rise quickly next year, and those who can't remortgage elsewhere will find they are stuck on a spiralling rate."
She added: "By giving existing customers access to a fixed rate normally available only to those borrowing at 95pc LTV, HBOS is putting borrowers first and treating them fairly. We hope that other lenders follow its good example."
David Hollingworth of London & Country Mortgages, another broker, said: "It's very encouraging to see lenders looking after their existing borrowers by at least giving them some kind of product choice other than standard variable rate when they reach the end of their existing deal.
"With lending so restricted these days, borrowers who have slipped into the higher loan to value brackets as a result of falling house prices will find that options are limited at best and more likely non-existent from other lenders. Halifax is enabling existing borrowers to take advantage of the rates tagged for 95pc LTV even if their current loan to value has increased beyond that and can be up to 120pc. Halifax offers rates fixed for four or five years, currently available from 5.19pc."
He added: "This is a good service for existing borrowers who frankly will not be able to go anywhere else. While many may like the idea of sticking on the lender's SVR while it is currently low, it is good that lenders continue to offer borrowers the ability to protect against future rate rises."
A spokeswoman for Halifax said: "When our borrowers come to the end of their existing product rate, we work with them on a case-by-case basis to determine the product options that are available to them."
Source: Telegraph
HBOS, which is part of Lloyds Banking Group, will consider offering a new mortgage to customers in negative equity whose existing deal, such as a fixed rate, is about to expire.
Normally such borrowers would see the rate they pay revert to the lender's standard variable rate (SVR) and would be unable to remortgage if the new loan were greater than the current value of the property as a result of the decline in house prices.
Lenders are generally restricting loans to 95pc of the property value, while borrowers wanting the most competitive deals need to borrow no more than 75pc or even 60pc.
But Halifax and Bank of Scotland, which are both part of HBOS, are offering the rates on 95pc loans to some remortgage customers needing to borrow more than the property value – up to 120pc of the value in some cases.
"HBOS told us they were doing this [offering 'negative equity' loans] earlier this month for borrowers with up to 120pc LTV [loan to value] deals, although they also said that this would not be publicised anywhere," one mortgage broker told The Telegraph.
Brokers said they believed HBOS to be the only major lender offering this option to customers in negative equity.
Melanie Bien of Savills Private Finance said: "HBOS is doing the decent thing, ensuring that existing customers who are in negative equity can still get a fixed rate.
"With other lenders, such borrowers are stuck on the standard variable rate, which is fine when such borrowing is cheap – as it is at the moment. But rates are likely to rise quickly next year, and those who can't remortgage elsewhere will find they are stuck on a spiralling rate."
She added: "By giving existing customers access to a fixed rate normally available only to those borrowing at 95pc LTV, HBOS is putting borrowers first and treating them fairly. We hope that other lenders follow its good example."
David Hollingworth of London & Country Mortgages, another broker, said: "It's very encouraging to see lenders looking after their existing borrowers by at least giving them some kind of product choice other than standard variable rate when they reach the end of their existing deal.
"With lending so restricted these days, borrowers who have slipped into the higher loan to value brackets as a result of falling house prices will find that options are limited at best and more likely non-existent from other lenders. Halifax is enabling existing borrowers to take advantage of the rates tagged for 95pc LTV even if their current loan to value has increased beyond that and can be up to 120pc. Halifax offers rates fixed for four or five years, currently available from 5.19pc."
He added: "This is a good service for existing borrowers who frankly will not be able to go anywhere else. While many may like the idea of sticking on the lender's SVR while it is currently low, it is good that lenders continue to offer borrowers the ability to protect against future rate rises."
A spokeswoman for Halifax said: "When our borrowers come to the end of their existing product rate, we work with them on a case-by-case basis to determine the product options that are available to them."
Source: Telegraph
Tuesday, 14 April 2009
Retailers call for action to prevent 'ghost towns'
Retailers have urged the Government to provide them with more assistance to keep shops occupied, as Whitehall unveils a £3m initiative today to try to prevent high streets from becoming ghost towns during the recession.
Hazel Blears, the Community Secretary, will also unveil provisions to help local people or entrepreneurs temporarily convert empty shops into community projects or businesses, such as local art displays, to avoid high streets being boarded up. The provisions include special planning application waivers, standard interim-use leases, and temporarily leasing shops to councils that will allow the shops to get makeovers.
Experian, the information services company, believes that 15 per cent of high street shops, or 135,000 outlets, could be left empty by the end of the year, as retail administrations and financial woes force retailers to close stores.
But the British Retail Consortium (BRC) said the way to prevent high streets becoming ghost towns is to remove burdens and help retailers survive in them. Stephen Robertson, director general of the BRC, said: "Art displays are not the answer for empty shops. We agree that vacant premises blight town centres. But contriving schemes to fill them with other users is tackling the symptom while ignoring the cause." He singled out property costs as a key burden. Mr Robertson said: "Rather than offering empty shops for uses that are rates-free, wouldn't it be better to reduce the rates burden for struggling retailers?"
The BRC won a victory for its members on 31 March when the Chancellor, Alistair Darling, modified plans to introduce a 5 per cent increase in business rates. As a result, business rates increased by only 2 per cent from 1 April, with the remaining 3 per cent rise being spread over the next two years, under new legislation unveiled by the Government.
However, prior to Mr Darling's U-turn, the BRC had called for the Government to freeze new business rates and reverse its policy on empty property relief, which was scrapped in April last year.
At a seminar in Stockport today, Ms Blears will say: "Empty shops can be eyesores or crime magnets. Our ideas for reviving town centres will give communities the know-how to temporarily transform vacant premises into something innovative for the _community ... and stop the high street being boarded up."
Entrepreneurs have begun many successful businesses from empty premises, such as Romy Fraser who started Neal's Yard Remedies from a disused warehouse in 1981.
Source: The Independent
Hazel Blears, the Community Secretary, will also unveil provisions to help local people or entrepreneurs temporarily convert empty shops into community projects or businesses, such as local art displays, to avoid high streets being boarded up. The provisions include special planning application waivers, standard interim-use leases, and temporarily leasing shops to councils that will allow the shops to get makeovers.
Experian, the information services company, believes that 15 per cent of high street shops, or 135,000 outlets, could be left empty by the end of the year, as retail administrations and financial woes force retailers to close stores.
But the British Retail Consortium (BRC) said the way to prevent high streets becoming ghost towns is to remove burdens and help retailers survive in them. Stephen Robertson, director general of the BRC, said: "Art displays are not the answer for empty shops. We agree that vacant premises blight town centres. But contriving schemes to fill them with other users is tackling the symptom while ignoring the cause." He singled out property costs as a key burden. Mr Robertson said: "Rather than offering empty shops for uses that are rates-free, wouldn't it be better to reduce the rates burden for struggling retailers?"
The BRC won a victory for its members on 31 March when the Chancellor, Alistair Darling, modified plans to introduce a 5 per cent increase in business rates. As a result, business rates increased by only 2 per cent from 1 April, with the remaining 3 per cent rise being spread over the next two years, under new legislation unveiled by the Government.
However, prior to Mr Darling's U-turn, the BRC had called for the Government to freeze new business rates and reverse its policy on empty property relief, which was scrapped in April last year.
At a seminar in Stockport today, Ms Blears will say: "Empty shops can be eyesores or crime magnets. Our ideas for reviving town centres will give communities the know-how to temporarily transform vacant premises into something innovative for the _community ... and stop the high street being boarded up."
Entrepreneurs have begun many successful businesses from empty premises, such as Romy Fraser who started Neal's Yard Remedies from a disused warehouse in 1981.
Source: The Independent
HSBC faces crisis over US credit cards
HSBC faces a meltdown at its US credit card operations where around $50bn (£34bn) has been lent to people with poor credit histories, say analysts.
Write-offs at the credit card arm of HSBC Finance Corporation (HFC), formerly Household, a sub-prime lender, could double to $10bn in 2009, according to brokers. Fears are growing that the bank could be forced to ask shareholders for more cash, on top of the £12.5bn it raised during its recent rights issue designed to bolster its balance sheet.
Analysts at Société Générale said that the strong take-up of the share offer did not necessarily "translate into smooth sailing for HSBC over the next couple of years" as it faced the prospect of rising bad debt and sour loans. The bank is not yet out of the woods, added SocGen.
Of particular concern are loans outstanding at HFC's credit card business, which stood at $49.6bn last year - representing around two-thirds of all HSBC credit card loans. The HFC credit card operation wrote off $5.4bn in bad or doubtful loans in 2008, according to the annual report, but made a profit of $520m. But analysts say that the profit will be wiped out this year and the offshoot will plunge into the red.
HSBC refused to comment on the speculation but said the HFC provisions "would be impacted by factors such as US unemployment and wage growth".
There is no suggestion that HFC's problems will push HSBC as a whole into loss - its businesses outside the US are highly profitable. But the bank, led by Stephen Green, has admitted that its purchase of Household for $15bn in 2003 has destroyed about $10bn of shareholder value.
Last month, the company unveiled a rights issue, slashed the dividend and disclosed that group profits had more than halved to $9.3bn. At the time, HSBC insisted that the proceeds of the cash call were not designed to plug an existing capital shortfall, but would give the bank a competitive advantage over rivals. But two weeks later it announced 1,200 redundancies as part of a review of operations to make it more efficient.
Leigh Goodwin, an analyst with Fox-Pitt, Kelton, said the job cuts were in response to a decline in demand for mortgage and savings products.
At the time of its annual results in March, HSBC chief executive Mike Geoghegan said HFC would stop making loans to new customers. It is also shutting 800 HFC branches in a move to shrink its exposure to the US housing and sub-prime markets.
Dissident shareholder Knight Vinke has demanded that the bank walk away from its HFC investment. It has also flagged up concern that the $34bn difference between the book and market value of HFC would have to be closed at some point, as it doesn't believe that US house prices will recover in the near future. But HSBC has queried Knight Vinke's assessment of the financial strength of HFC.
Source: Guardian
Write-offs at the credit card arm of HSBC Finance Corporation (HFC), formerly Household, a sub-prime lender, could double to $10bn in 2009, according to brokers. Fears are growing that the bank could be forced to ask shareholders for more cash, on top of the £12.5bn it raised during its recent rights issue designed to bolster its balance sheet.
Analysts at Société Générale said that the strong take-up of the share offer did not necessarily "translate into smooth sailing for HSBC over the next couple of years" as it faced the prospect of rising bad debt and sour loans. The bank is not yet out of the woods, added SocGen.
Of particular concern are loans outstanding at HFC's credit card business, which stood at $49.6bn last year - representing around two-thirds of all HSBC credit card loans. The HFC credit card operation wrote off $5.4bn in bad or doubtful loans in 2008, according to the annual report, but made a profit of $520m. But analysts say that the profit will be wiped out this year and the offshoot will plunge into the red.
HSBC refused to comment on the speculation but said the HFC provisions "would be impacted by factors such as US unemployment and wage growth".
There is no suggestion that HFC's problems will push HSBC as a whole into loss - its businesses outside the US are highly profitable. But the bank, led by Stephen Green, has admitted that its purchase of Household for $15bn in 2003 has destroyed about $10bn of shareholder value.
Last month, the company unveiled a rights issue, slashed the dividend and disclosed that group profits had more than halved to $9.3bn. At the time, HSBC insisted that the proceeds of the cash call were not designed to plug an existing capital shortfall, but would give the bank a competitive advantage over rivals. But two weeks later it announced 1,200 redundancies as part of a review of operations to make it more efficient.
Leigh Goodwin, an analyst with Fox-Pitt, Kelton, said the job cuts were in response to a decline in demand for mortgage and savings products.
At the time of its annual results in March, HSBC chief executive Mike Geoghegan said HFC would stop making loans to new customers. It is also shutting 800 HFC branches in a move to shrink its exposure to the US housing and sub-prime markets.
Dissident shareholder Knight Vinke has demanded that the bank walk away from its HFC investment. It has also flagged up concern that the $34bn difference between the book and market value of HFC would have to be closed at some point, as it doesn't believe that US house prices will recover in the near future. But HSBC has queried Knight Vinke's assessment of the financial strength of HFC.
Source: Guardian
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