The Government is planning to use next week’s budget to introduce plans to grade all mortgages in a bid to kick start the wholesale money markets. Chancellor Alistair Darling is understood to be arranging the introduction of a new system under which all mortgages are graded, with the least risky awarded a gold standard ‘Kitemark’. Investors have been reluctant to buy mortgage-backed securities for fear they contain risky sub-prime loans and this has made it difficult for banks to remove mortgage assets from their books. It is hoped that by providing investors with greater reassurance about the quality of the loans they are taking on, it will make it easier for lenders to sell on mortgages to investors. The scheme could help re-vitalise the wholesale money markets and provide banks with access to cheaper funding, which subsequently could be passed on to consumers in lower mortgage rates.
Posts Tagged ‘Government’
Government plans to grade mortgages
Wednesday, March 5th, 2008Government rakes in £31bn in stamp duty
Thursday, February 21st, 2008Homebuyers have forked out £31.5bn in stamp duty over the past ten years. Last year alone, the figure reached £6.5bn - a staggering 675% increase since Labour came to power. In 1997-1998, just £830m in stamp duty was paid. Increases introduced by Gordon Brown when he was Chancellor, which were widely criticised at the time, are forcing record numbers of homebuyers to pay stamp duty. Before Labour came to power, the tax was charged at just one per cent on all properties sold for £60,000 or more. Today, it is charged at 1% on houses costing between £125,000 and £250,000, 3% on those worth from £250,000 to £500,000 and 4% for those sold for more than £500,000. In London, the average asking price for a home is £402,000, which would mean stamp duty of more than £12,000. The majority of first-time buyers are now forced to pay the tax, which - coupled with the recent property boom - makes finding enough money to buy a home even harder.
Banks protest at Rock’s unfair advantage
Tuesday, February 19th, 2008Rival banks protested that the nationalised company could enjoy a huge competitive advantage over them and steal business away. And MPs complained that the Rock was risking repossessions by attracting new customers with offers to lend them far more money than their homes are worth, by offering cheaper rates on loans of up to 125% of property values - where a quarter of the debt is unsecured. The political crisis deepened after the Government refused to deny claims that taxpayers face a £100m bill for the cost of advice from banks and lawyers during the failed efforts to secure a private sale. The Prime Minister has said nationalisation was a temporary measure, although new Northern Rock boss Ron Sandler has said it will be ’some years’ before the bank can repay its debts. Today’s emergency Bill will give the Government special powers for 12 months to nationalise any bank, not just Northern Rock where it is necessary to protect “the stability of the UK financial system”.
What now for Northern Rock mortgages?
Monday, February 18th, 2008Homeowners with a Northern Rock mortgage will continue to pay it as normal. Monthly payments and terms and conditions will remain the same, but Northern Rock mortgage holders now owe the taxpayer money rather than the bank. They will find, however, that securing a new deal from Northern Rock is unlikely to be worthwhile, as the bank’s mortgages have become uncompetitive since the crisis began and better rates can be found elsewhere. The number of new mortgages from Northern Rock will be seriously reduced and rates are likely to remain uncompetitive. The Government will seek to avoid being accused of using the benefits of state ownership to beat rival mortgage lenders’ offers. Currently, Northern Rock’s two-year fixed rate mortgage is set at 6.99%, with a £1,995 fee – this compares to Halifax, which is offering a two-year fixed rate at 5.89% with a £999 fee.
Northern Rock nationalised
Sunday, February 17th, 2008The government decided to nationalise Northern Rock today, abandoning a five-month attempt to find a private sector buyer for the ailing bank. “In the current market conditions we do not believe the two proposals deliver sufficient value for money for the taxpayer,” Finance minister Alistair Darling told a news conference. “So the government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership.” The government will put forward legislation on tomorrow to take the bank into public hands — the first major nationalisation in Britain since the 1970s — and trading in Northern Rock shares was suspended.
