Nine building societies have credit ratings downgraded

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

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

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