Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Saturday, August 30, 2008

Darling Surrenders

Alistair Darling has all but given up trying to keep Britain out of recession, by announcing today in The Times that Britain could be heading for its worst economic downturn for 60 years.

Darling also admitted that he had no idea how serious the credit crunch would become.

This is man who has clearly given up, and who is likely to be out of a job in the next month.

Regrettably the British economy and British voters are stuck with Labour and the disastrous tripartite regulatory system that Brown created for another two years, the damage that Labour will do to the economy in that time is incalculable.

Every Labour government ends in economic failure.

Thursday, August 28, 2008

Banquo's Ghost

Much like Banquo's ghost, Northern Rock continues to haunt the government.

Northern Rock, having sold excessively expensive and outsized mortgages to those who could least afford to manage them, is now attempting to repossess the homes of those who have failed to keep up with the payments on these most unsuitable of products.

Research published by Standard & Poor shows that Northern Rock has been responsible for one in 13 repossessions in the UK in the second quarter of this year, as its customers are getting into trouble much faster than other borrowers.

Standard & Poor's research shows that a monthly average of 353 of "The Wreck's" best borrowers faced repossession in the second quarter, up from 134 in the previous three months.

S&P also noted an increase in Northern Rock borrowers falling more than 90 days behind on their repayments.

This of course indicates that the loan book may not be as healthy as the government would have had us believe when it made the taxpayer responsible for bailing out this failed firm.

Lib Dem Treasury spokesman Vince Cable accused Northern Rock of being very aggressive in dealing with repossessions, after granting mortgages worth more than the value of properties.

He is quoted in The Journal:

"Northern Rock have been particularly ruthless in repossessions because they have got a lot of 125% Together mortgages which were completely mad at the time and even madder now."

The man who oversaw Northern Rock's grab for customers, and pushed for an aggressive lending policy that has failed the company and its customers, has done rather well for himself though.

Adam Applegarth, ex CEO, was allowed to leave with over £1M in bonuses and pension top-ups and is currently still receiving over £60K per month.

Nice work if you can get it!

Friday, August 22, 2008

Wheels Falling Off The Economy

Official figures indicate that Britain is on the verge of recession as output ground to a halt between April and June this year, the poorest performance since 1992.

Jonathan Loynes, of Capital Economics, is quoted in The Times:

"The economy now looks set to grow by just 1.2% or so this year, with a very strong chance of a technical recession in the second half. And things will be considerably worse in 2009."

The pressure is now on the Bank of England to wake up to the threat of recession and to cut rates. However, given that Mervyn King has already publicly admitted that Britain may well slip into recession, it would seem that he is prepared to allow this to happen; ie there will be no rate cuts.

Thursday, August 21, 2008

Greed

Britain's utility companies are to be congratulated on being even more greedy than banks, insurance and credit card companies, in their brazen fleecing of the consumer.

E.ON added its name to the list of shame by raising prices this morning, electricity up by 16% and gas by 26%.

Similar recent increases were imposed by EDF and British Gas.

Time that the sleepy old watchdogs, that are allegedly looking after the interests of the ripped off British consumer, to wake up and earn their pay.

Tuesday, August 19, 2008

What A Whopper

The Times quotes Professor Kenneth Rogoff, a leading academic economist, as saying that there will be worse news to come from the worldwide credit crunch.

"The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come.

We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one — one of the big investment banks or big banks
."

Heartwarming stuff!

However, before people start jumping from window ledges, it is worth remembering that financial crises come and go; additionally, the crunch is as a result of the banks' greed and stupidity.

What goes around comes around!

Monday, August 18, 2008

Cash Call Fails

Bradford & Bingley's (B&B) cash call has flopped in the eyes of its shareholders, with only 27.8% of shareholders taking up its £400M rights issue leaving the remainder in the hands of its underwriters, Citigroup and UBS.

B&B's new CEO, Richard Pym, has his work cut out to try to restore confidence in the bank.

That being said, Mr Pym can take some small comfort in the fact that the take up of the B&B issue has significantly exceeded the take up of the HBOS rights issue. Only 8.29% signed up to that issue which closed in July.

Friday, August 15, 2008

Reposessions Up

House repossessions in Britain have risen alarmingly to levels not seen since the last recession.

The number of mortgage repossession orders posted by courts in England and Wales between April and June this year rose by 24% to 28,658, compared to the second quarter last year.

The figures are in line with the number of orders made in mid-1992, at the height of the recession.

Unlike the last recession, repossession figures show that "second charge" repossessions feature strongly in the figures; indicating that many have unwisely used their property to secure an extra line of credit.

Shelter forecasts 9,000 more people will lose their houses to "second-charge" lenders.

Meanwhile the Treasury and Bank of England argue over what to do ease the liquidity crisis; with Mervyn King Governor of the Bank sticking firmly to his principles, and insisting that it is not the Bank's role to provide credit.

Thursday, August 14, 2008

HBOS Scales Back

HBOS announced today that it will axe 425 job cuts, and scale back its TMB brand which provides finance for new builds and buy-to-lets.

HBOS recently announced a fall in profits of 72% to £848M.

As from late August, HBOS will cease taking on new business from its TMB division and stop offering loans via its Intelligence Finance brand.

The FT reports that the UK mortgage market will shrink from £368BN in 2007 to £280BN this year because the "number of lenders who relied on securitisation have quit the market".

Tuesday, August 12, 2008

Housing Market Grinds To A Halt

The Royal Institution of Chartered Surveyors (RICS) report that the housing market ground to a virtual standstill last month, as a result of the lack of mortgages.

RICS report that the average number of property sales handled by surveyors, over the past three months, fell to 14.4.

Needless to say the government's botched leak about the possibility of lifting stamp duty for a few months has added to the problems, as people have now delayed making a purchase until the situation is clarified.

Unfortunately the government will not be clarifying its position anytime soon, as the Treasury blames Number 10 for the leak and Number 10 claims it was not responsible.

Brown's government is collapsing around his ears, and is bringing the economy down with it.

Monday, August 11, 2008

£1M Wiped Out Per Minute

PriceWaterhouseCoopers (PWC) have published an analysis that shows that £1M per minute (£600BN) has been wiped out from the UK's total wealth, since the credit crunch started a year ago.

PWC estimates that £400BN has been written off residential property, and £200BN written off the stock market valuations of the banks and other financial institutions.

PWC estimate that this will lead to a reduction in expenditure of around £12BN to £16BN over the next 12 months.

As if that were not gloomy enough, PWC add the rather worrying caveat that the report is "conservative" and that this is its best case scenario.

Friday, August 08, 2008

Home Reposessions Highest Since 1999

The Council of Mortgage Lenders (CML) reports today that the number of homes repossessed in Britain in the first six months of the year has risen by almost 50% (compared with last year), to the highest since 1999.

Repossessions rose to 18,900 from 12,800. Although this is not good news, it needs to be put in context. In the first half of 1991 home repossessions hit a peak of 38,900.

Homeowners are continuing to face difficulties, as they try to refinance fixed rate mortgage deals that have run out.

Alastair Darling and Gordon Brown's solution, to date, has been to leak an idea about possibly suspending stamp duty. All well and good except:

1 It does not help those who cannot find mortgages.

2 The uncertainty over whether this is a genuine proposal or not will cause people to delay purchase, thus further undermining the market.

A little more thought would be best, before they leak any more ideas.

Wednesday, August 06, 2008

Pensions Black Hole

As the economic downturn continues, and negatively impacts the FTSE, pension schemes are feeling the effects.

Actuarial consultants Lane Clark & Peacockfell, report that pensions went into a £41BN deficit in mid-July, reversing last year's £12BN surplus.

The effective and efficient management of pensions require a very long term view of market ups and downs. Unfortunately, current pension reporting requirements introduced in 2002 do not take a the long term view and encourage short termism of the worst kind.

A major overhaul of pension reporting is required urgently.

Tuesday, August 05, 2008

Northern Wreck

The long suffering taxpayers of Britain got taken to the cleaners again by Brown and his mob, as it has emerged that £3BN of taxpayer loans to Northern Rock will be written off.

The "Wreck" has published worse than expected results, showing a loss in the first 6 months of £585M, as borrowers fail to meet their obligations.

The Treasury will now convert £3BN of government loans to the Rock, and £400M of Rock preference shares into ordinary Rock shares.

However, the plan does require approval from our lords and masters in Brussels.

Monday, August 04, 2008

HSBC 28% Profit Collapse

HSBC revealed some lousy results today, much as expected. The ongoing credit crisis (caused by the banks' irresponsible lending) has knocked £5.1BN (28%) from its first half profits to £5BN.

HSBC will not comment as to whether the losses from its toxic US loans have peaked or not. However, its provision for US consumer finance now stands at $6.8BN (85% higher than the same period last year).

HSBC chairman, Stephen Green, maintained a stiff upper lip and noted that the outlook was challenging.

Quite!