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 ‘Sub-prime’
Government plans to grade mortgages
Wednesday, March 5th, 2008Last lender pulls 125% mortgage deal
Saturday, February 23rd, 2008Lenders have completely pulled out of the 125% mortgage market as the credit crunch continues to bite. Birmingham Midshires Solutions said it was pulling its version of the product, which will lend people up to 125% of their property’s value, due to market conditions. The group had been the only provider to continue offering the deals after Alliance & Leicester, Abbey, Northern Rock, Coventry Building Society and Godiva Mortgages all said they were scrapping them earlier this week. Faced with only limited availability of funds, lenders are keen to concentrate on less risky mortgages, and the problem has been compounded by fears that house prices could fall. There are now just two mortgage providers who will advance more than 100% of a property’s value, with Scottish Widows offering loans of 110% to professionals only, while Dunfermline Building Society is offering 110% to professionals and 105% to graduates but only in Scotland.
