The ongoing "credit crunch"

[size5]

Two items from the BBC news site that may be of interest.

"First Direct has temporarily stopped offering any of its mortgages to people who are not already its customers.

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.

Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.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."

In fairness, they have stated that they view it as strictly temporary and they hope to be back in the market soon.

In a similar vein,

"The continuing decline in the property market has been underlined by the latest Bank of England figures.

The number of new mortgages approved for house purchase fell slightly in February to just 73,000, said the Bank.

That was a 39% drop on the same month a year ago, and leaves prospective mortgage lending still at its lowest level for 13 years."


I haven't reproduced the articles in full, and the second one also indicates that remortgage deals for people swapping lenders had also suffered a fall, but it does leave you wondering just how all this will turn out and how long it will last. [?][?][?]

[ianmillington]

Indeed it does Mike. Also I'm told that more of the adverse lenders (SPML, Preferred) have stopped writing UK Mortgage Business and so the options for those in dire need are becoming fewer and fewer.

Ian

[size5]

Ian, I am reliably informed that you are correct and that the market is shrinking for that type of product alarmingly quickly.

I also don't think it is a coincidence that the number of repossession enquiries that I am dealing with from this type of lender is also going through the roof as well. They are litigating a lot quicker and a lot more aggressively (never thought that would actually be possible!!) than they usually do as well.

[ianmillington]

A return to the interim order in some cases I suggest (so long as we are given the time of course). Back to the old days you reckon?


Ian

[size5]

It could well be, I am hoping against hope that the doom mongers re the expected explosion in repossession figures have wildly overestimated the scale of the problem as I personally find those enquiries the most distressing, in human terms, of any of the enquiries I deal with. On the other side of the coin though, they can be the most rewarding as well when you can make a positive difference.

[Soulgrowth]

I may be thinking ahead too far here but my mortgage is with Preferred and I have been wondering for a few weeks now what will happen when it comes off the fixed rate which is due to end in September 2010. I know that lots of things can change by then but was just curious. If the worst comes to the worst will I just be able to carry on with the non-fixed rate or will I HAVE to try and find a new mortgage ... which could be interesting.

I was advised all-round to go for interest only, having always had repayment mortgages in the past, now I am getting a little concerned that if I HAVE to come off my mortage I may be in negetive equity and wondered whether it was worth asking to be put back onto a repayment mortgage at this stage.

Would be grateful for your thoughts folks.

Debbie

[MelanieGiles]

I suspect that things will have settled down by 2010, but I don't think that we will ever see the days of 100% plus self-certified interest only mortgages again - and rightly so as many people are now caught out with unaffordable housing costs.

[IFA Law]

On top of First Direct, NatWest and Royal Bank of Scotland and Kent Reliance Building Society became the first lenders this year to raise their variable mortgage rates for existing customers.

[size5]

Further, the Co-Op have made an announcement re withdrawing of products tonight I am led to believe, although I haven't seen the announcement myself (heard it on 5 live on my way home)

I am also led to believe that Swift are out of the market altogether, and many, many more sub-prime providers are expected to either follow suit or to contract their product ranges significantly in the near future.

The effect of all this remains to be seen, but it is certainly NOT good news for those that are in most need.

[CoverItAll]

"Mortgage Strategy" has just announced that Mortgage firms team up to defend lenders.

Seven of the biggest UK mortgage distributors have joined forces to call on mortgage brokers to understand and make allowances for the huge strain the credit crunch is placing on lenders.

The unprecedented move sees the heads of six rival companies, representing over 30,000 brokers, join together to back an open letter to mortgage intermediaries written by Premier Mortgage Service managing director John Malone.

The group comprises PMS, Sesame, Openwork, Pink Home Loans, Personal Touch Financial Services, Legal & General Mortgage Club and Home of Choice.

The letter says intermediaries are wrong to accuse lenders of acting irresponsibly and breaking the requirements of the FSA's treating customers fairly regime by withdrawing products at short notice.

It says: "This action by the lenders in our opinion does not constitute part of treating customers regime but more a commercial decision to protect their own liquidity position in keeping with running their business in a commercially sound way."

The group of firms say that they understand that due to the current economic climate, some lenders are promoting their products more cheaply through branches to help control lending.

The letter calls on brokers to encourage clients to save more regularly with lenders to alleviate some of the liquidity problems.

The group suggests the situation will not improve until at least halfway through 2009 unless the Bank of England and the Government intervene to restore confidence in the wholesale markets.

Malone says: "This is serious, it is about the well-being of the country. We have got to bring our resources together as we have a real issue here."

Malone says he believes that gross mortgage lending could be as low as £250bn this year, a fall of nearly a third from £360bn last year.

He says: "This letter is the first one for us to get together. We need to move the message forward to the Government and the Treasury. I think that distributors getting together to send a collective message will have a big impact."

[size5]

Nice to hear from you John.

My own opinion, for what it is worth, is that the middle of 2009 looks a little on the optimistic side to me, I can't see this turning full circle in that time at all.

Regards.

[CoverItAll]

I agree with you. This morning Halifax were being very "bullish" and suggesting that borrowers were unlikely to be hit as hard as the Press is making out, but they were talklng about a small section of the market - prime borrowers on fixed rated deals.

I think we shall all have to work very hard for the next 2-3 years to obtain deals for Forum Members that are affordable. Very often, I suspect, we shall be giving news to our Clients that they will not want to hear.

Interesting to note too that of the 110,594 people currently within IVA's, about 150 per week are entering the fourth year in their IVA, and are therefore about to face the additional challenge of their Equity Release Clause. For many of these, their inability to release equity will presumably lead to an extension of their IVA into year six ?

[ianmillington]

John, I think that many of those who are currently in year 4 will have some very perverse equity release provisions (all equity, 75% of equity, all bar £5k to name but 3 I'm aware of). I anticipate loads of variations being put forward to avoid failure of their IVA due to the debtors being unable to comply with these terms.

The protocol term is great but unfortunately not retroactive. Everyone whose IVA is in the year 4 onwards should revisit the equity release clause and modifications thereto and speak to their Supervisor as it is clear that this is not something that is going to go away during the course of this year.

Ian.

[size5]

It is certainly of great concern to all involved and some challenging times lie ahead for everyone methinks.

Regards.

[Soulgrowth]

How will it affect the equity release clauses where people in IVAs are already having trouble getting mortgages because of poor credit history, along with the withdrawal of the sub-prime market?

Debbie