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Latest Articles
Inflation rise ‘higher than expected’ The Bank of England has confirmed the Consumer Price Index, a key indicator of inflation, has risen from 3% to 3.2%. Because the figure is more than 1% above the target, the Bank’s Governor, Mervyn King, has written to Chancellor Alistair Darling to explain the rise. In King’s letter, he said the CPI rise had been higher than expected. King said: “Despite the increase in CPI inflation in February, we believe that the sharp decline in CPI inflation since its peak in September is likely to resume in the coming months. It is likely that over the next year CPI inflation will move below target, although the profile of inflation could be volatile, reflecting the reversal of the temporary change in VAT on CPI inflation.” In addition, the Retail Price Index (RPI), which includes housing costs, fell to 0%. The Office of National Statistics noted there was a large downward pressure from housing with the main effect coming from mortgage interest payments which are excluded from the CPI. Source: www.Mortgagesolutions-online.com
Bank mortgage lending on the rise
Figures from the British Bankers’ Association (BBA) have revealed lending by banks was stronger in February, with a net rise of £3.9bn. However, while net lending showed an improvement, gross mortgage lending fell to £9.2bn – its lowest level since June 2001. Approvals showed some improvement from January, with £3.5bn home purchase loans approved, up from £2.9bn in January, with the total number of mortgages approved reaching £7.8bn. However, they remain at a very low level – the number of mortgages approved is down 56.5% on last year. BoE cuts BBR once again The Bank of England has cut Bank base rate (BBR) for the sixth consecutive month, this time by 50 basis points to 0.5%. This month's cut had been widely expected, with the Bank of England now expected to turn to quantitive easing, the process of buying assets by creating new money. The institutions selling those assets will then have 'new' money in the accounts, which in theory will boost their money supply.
Asset scheme talks ongoing at Lloyds after profits plummet Lloyds Banking Group has confirmed its discussions with the Treasury about becoming the second lender to commit to participating in the Asset Protection Scheme are “progressing and well advanced”, after revealing Lloyds TSB’s statutory profits before tax fell 80% in 2008. In addition its HBoS subsidiary made a pre-tax loss of £10.8bn. Lloyds emphasised there can be no certainty about the outcome of the Treasury talks. RBS yesterday announced it had signed up to the scheme, which had allowed it to commit a further £9bn towards mortgage lending in 2009. The firm defended its performance over the year, with chairman Sir Victor Blank describing the results as reasonable given the current market volatility. Lloyds revealed its market share of gross new mortgage lending increased to 10.8% over the year, up from 8.1% in 2007, highlighting that while new lending in the UK market fell nearly 30%, new lending by the group fell just 5% to £27.8bn. In a statement to the London Stock Exchange, the firm said: “The higher market share of gross mortgage lending, in conjunction with a reduction in the Group's share of mortgage redemptions, has led to a significant increase in our market share of net new lending to 27.5%, which partly reflects the withdrawal of a number of competitors from the UK mortgage market. Group mortgage balances outstanding increased by 11% to £112.9bn.” The firm also defended its acquisition of HBoS, emphasising that in spite of the losses, Lloyds has purchased £17.9 billion of tangible net asset value. Blank explained: “HBoS had developed a number of specialist businesses that brought greater returns at greater risk, and these did not fit the Lloyds TSB risk appetite. We recognised this in our due diligence and this was reflected in the price we agreed to pay. We are buying the business in the down part of the economic cycle, at a significant discount to book value, which increases the likelihood of value creation, and we paid in shares rather than cash which in some part insulated the Lloyds TSB shareholders from market risk.” Source: www.Mortgagesolutions-online.com
Repossessions up 54%: CML The latest statistics from the Council of Mortgage Lenders (CML) show the number of people losing their homes rose by 54% last year, slightly less than the 45,000 previously forecast by the industry body. Lenders repossessed around 40,000 homes in 2008, while the number of homeowners in arrears soared by 70%. But some 219,000 people were three or more months behind with their mortgage payments at the end of the year, up from 127,500 at the end of 2007. The body said 500,000 people could fall behind with three or more mortgage payments this year. The CML said that the lower repossession figures were because lenders were making ‘strenuous efforts’ to try to keep people in their homes. Michael Coogan, director general of the CML, said that there was a rise in the numbers of borrowers handing back their keys or abandoning their properties. He added: "We strongly urge borrowers to contact their lender and work with them before taking this step, as there may be other solutions. Borrowers are still liable for their debt, even if they leave the property, so working through their problems is much more likely to be in their best interests.” Source: www.Mortgagesolutions-online.com
Sale and Rent Back (SARB) to be Regulated from July The FSA has published a consultation paper on how best to address issues within the sale-and-rent-back market, which includes a proposal to begin an interim period of regulation from July. The set of proposals published today follow the Office of Fair Trading’s (OFT) recommendations that the industry should be regulated to protect consumers. A two-stage approach has been suggested by the FSA, with an interim regulatory regime to be brought in from July, with a full regime following in the second quarter of 2010. Under an interim regime, sale-and-rent-back firms would need to meet existing FSA threshold conditions. These include being run by fit and proper people, adhering to the Principles of Business and will need to meet some systems and conduct of business rules. The final regime will implement prudential requirements, full conduct of business rules and firms will need full FSA authorisation. The FSA is developing regulations after an OFT investigation revealed customers were often misled regarding their rights to stay in their home after selling to a sale-and-rent-back firm, and the true value of their property. Dan Waters, director of retail policy at the FSA, explained: “We believe the issues identified by the OFT warrant a fast response, which is why we are seeking to bring in an interim regime this summer designed to ensure fairer treatment of customers as soon as possible, including the right to redress. “This two-stage approach is a new departure for us, but we believe it provides the right balance between implementing regulation quickly in order to address more serious cases of detriment, while giving us time to develop and implement a full regulatory regime that is suitable.” Last week, the OFT also revealed it was seeking evidence from 16 sale-and-rent-back firms to prove their advertising was not misleading for potential consumers. The Council of Mortgage Lenders wasted little time in welcoming the move. Michael Coogan, director general of the trade body, said: "Lenders cannot always avoid repossession action through the courts, and sale-and-rent-back could potentially be a realistic alternative for some people as a last resort. But basic regulated standards of fair treatment and redress are essential, to avoid vulnerable households being exploited by unscrupulous operators."
UK reduces interest rates to 1% |
The Bank of England has reduced interest rates to a record low of 1% from 1.5%, in an attempt to boost the shrinking economy. This marks the fifth interest rate cut since October, as the Bank seeks to encourage more lending. However, there are concerns that savers will be hurt by lower interest rates. And business groups argue that this rate reduction will not be enough to ease the economic crisis, and will not encourage banks to lend. The decision comes after official data showed the UK had entered a recession in December, after two successive quarters of economic contraction. The Bank Rate has now been reduced from 5% in October last year. In a statement, the Bank of England said that the rate cuts, along with government measures to boost the economy, "would provide a considerable stimulus to activity as the year progressed." Source: www.bbc.co.uk
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