Britain's second largest bank, Royal Bank of Scotland, is to ask shareholders for about £10bn of extra cash to improve its financial position.
RBS will raise the money from existing investors through by far the biggest rights issue in UK corporate history.
The global credit crunch has meant banks worldwide are keen to shore up their capital positions - and it is thought others may follow RBS's move.
RBS, owner of NatWest, Ulster Bank and insurer Direct Line, has not commented.
In a statement, it would only confirm that it would give a trading update next week as planned. The update is due ahead of its annual meeting on Wednesday.
It's the quid pro quo for the Bank of England's new scheme to pump money into the banking system
Robert Peston, BBC business editor
"I understand that next week they will announce a massive rights issue, that's a demand for new cash from their shareholders," said BBC business editor Robert Peston.
Analysts stressed that this was not something that should worry people with accounts at any RBS banks.
"This is not a customer issue, it's a shareholder issue," said Justin Urquhart Stewart from Seven Investment Management.
'Sharing pain'
Heads of many of Britain's biggest banks, including RBS, had a meeting at Downing Street on Tuesday to discuss the continuing effects of the credit crisis.
WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones
The Bank of England is considering a plan to start accepting UK mortgage-backed securities in return for government bonds in an attempt to get banks lending to each other again, which in turn should ease up lending to individual borrowers.
Liberal Democrat treasury spokesman Vince Cable supported the idea of a rights issue in addition to the Bank of England's proposals.
"It's positive and it's necessary and it's got to happen for all of the big banks," he told the BBC.
"Essentially this is all about sharing pain - shareholders have got to accept that any losses arising from the credit crunch accrue to banks and not to the taxpayer."
The government and the Conservatives declined to comment.
Friday 18 April 2008
Sunday 13 April 2008
Personal loans handed out without checks
The deepening credit crisis is driving up the cost of taking out a loan, despite the cuts in the Bank of England base rate. Yet lenders are still failing to carry out proper checks to make sure that borrowers are able to repay them.
The average rate on a three-year £5,000 unsecured personal loan has risen from 8.2% to 9.9% in the past year, adding about £300 to the cost, according to financial data provider Moneyfacts.
But this has not deterred borrowers. Bank of England figures for February show that new consumer credit rose by £2.4bn. In January that figure rose by £900m.
Alarmingly, many of these loans are being taken out without lenders seeking proof of borrowers' income, credit experts say.
According to price comparison service uSwitch.com, only 30% of loan applicants in the past 12 months were asked to prove how much they earn.
And 45% of consumers taking out an unsecured loan did so with a company other than their own bank. This leaves the lender with comparatively little information about the person's ability to manage debt.
Moira Haynes of Citizens Advice is critical of this 'loose' lending. Even in these troubled times two out of three borrowers don't need to prove their salary. 'We see far too much evidence of people having been lent money where it was clear from the start that they would not be in a position to repay it,' she says. 'We have repeatedly called on lenders to carry out thorough checks and it is imperative that this is done.'
Mike Naylor of uSwitch.com agrees: 'With more than 7,716 loan repayments being missed every day and record write-offs, you might think that lenders had learnt their lesson.'
The British Bankers' Association last week announced changes to the Banking Code that include a commitment to 'responsible lending-It also promised more help for consumers who fall into financial difficulties.
Following the changes, which took effect from March 31, all lenders will have to carry out a compulsory check with a credit reference agency when consumers apply for credit. They will also have to check either the applicant's income and financial commitments, or how they have handled their finances in the past or carry out a credit scoring process.
Personal loans: What you need to know...
Though personal loan rates have gone up - since January the average overall rate for all sizes of loan has risen from 10.6% to 11.4% - attractive deals are still available for those who look carefully.
Online price comparison services give details of the most competitive deals on the market, though be aware that lenders will normally offer the best rates only to borrowers with an excellent credit record.
Although your bank or building society may be the first to offer you a loan, do not assume it is the best deal as the rates available from different providers can vary wildly.
For example, for someone taking out a £5,000 loan over three years, Co-op Bank has a personal rate of 9.9%, available to the 'lowest risk' customers, while Bank of Scotland's best rate is 9.3%.
In contrast, Barclaycard charges 6.8% on a three-year £5,000 loan while yourpersonalloan.co.uk charges 6.9%. For those with a very good credit record, consumer-to-consumer lender Zopa has the best rate at 6.6%.
Borrowers unsure about their credit rating should check their credit record with one of the major credit reference agencies such as Equifax or Experian.
Price comparison website moneysupermarket.com has a 'Smart Search' facility provided by Equifax, which estimates customers' credit scores and then shows which loans they are likely to be accepted for.
The average rate on a three-year £5,000 unsecured personal loan has risen from 8.2% to 9.9% in the past year, adding about £300 to the cost, according to financial data provider Moneyfacts.
But this has not deterred borrowers. Bank of England figures for February show that new consumer credit rose by £2.4bn. In January that figure rose by £900m.
Alarmingly, many of these loans are being taken out without lenders seeking proof of borrowers' income, credit experts say.
According to price comparison service uSwitch.com, only 30% of loan applicants in the past 12 months were asked to prove how much they earn.
And 45% of consumers taking out an unsecured loan did so with a company other than their own bank. This leaves the lender with comparatively little information about the person's ability to manage debt.
Moira Haynes of Citizens Advice is critical of this 'loose' lending. Even in these troubled times two out of three borrowers don't need to prove their salary. 'We see far too much evidence of people having been lent money where it was clear from the start that they would not be in a position to repay it,' she says. 'We have repeatedly called on lenders to carry out thorough checks and it is imperative that this is done.'
Mike Naylor of uSwitch.com agrees: 'With more than 7,716 loan repayments being missed every day and record write-offs, you might think that lenders had learnt their lesson.'
The British Bankers' Association last week announced changes to the Banking Code that include a commitment to 'responsible lending-It also promised more help for consumers who fall into financial difficulties.
Following the changes, which took effect from March 31, all lenders will have to carry out a compulsory check with a credit reference agency when consumers apply for credit. They will also have to check either the applicant's income and financial commitments, or how they have handled their finances in the past or carry out a credit scoring process.
Personal loans: What you need to know...
Though personal loan rates have gone up - since January the average overall rate for all sizes of loan has risen from 10.6% to 11.4% - attractive deals are still available for those who look carefully.
Online price comparison services give details of the most competitive deals on the market, though be aware that lenders will normally offer the best rates only to borrowers with an excellent credit record.
Although your bank or building society may be the first to offer you a loan, do not assume it is the best deal as the rates available from different providers can vary wildly.
For example, for someone taking out a £5,000 loan over three years, Co-op Bank has a personal rate of 9.9%, available to the 'lowest risk' customers, while Bank of Scotland's best rate is 9.3%.
In contrast, Barclaycard charges 6.8% on a three-year £5,000 loan while yourpersonalloan.co.uk charges 6.9%. For those with a very good credit record, consumer-to-consumer lender Zopa has the best rate at 6.6%.
Borrowers unsure about their credit rating should check their credit record with one of the major credit reference agencies such as Equifax or Experian.
Price comparison website moneysupermarket.com has a 'Smart Search' facility provided by Equifax, which estimates customers' credit scores and then shows which loans they are likely to be accepted for.
Saturday 12 April 2008
Bank lowers interest rates to 5%
UK interest rates have been cut to 5% from 5.25% by the Bank of England in an attempt to spur the economy in the face of the global credit crunch.
It is the central bank's third cut in interest rates since early December.
The Bank said that disruption in financial markets and tighter credit conditions could lead to a slowdown in the wider economy.
The largest mortgage lenders say they will pass on the cut to their mortgage customers who pay variable rates.
Decision welcomed
Business groups welcomed the decision and called for further cuts to shore up growth.
"It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses," said David Kern, economic adviser to the British Chambers of Commerce.
The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action
Stuart Porteous, RBS
"Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already."
The cut had been widely forecast by economists.
"So far the Bank's gradual approach to cutting rates has been the right one," said Martin Temple, chairman of the EEF manufacturers' group.
"But, given how quickly the situation is changing, there are now greater risks to business and consumer confidence."
Mortgage rates
The UK's biggest mortgage lenders responded quickly, saying they would cut their standard variable mortgage rates by the full quarter of a percentage point.
Their mortgage rates which track the Bank of England's base rate will be cut automatically also.
Irresponsible lending is the cause of most of our current financial issues
Clive, Woking, UK
The lenders that have said they will do this are the Halifax, Nationwide, Bank of Scotland, Britannia, Lloyds TSB, Cheltenham & Gloucester, First Direct, Royal Bank of Scotland, NatWest and Woolwich.
Most of the rest say they say they will take from a few days to two weeks to decide how to respond.
Despite this widely anticipated move by the Bank of England, many mortgage lenders have in recent weeks had to withdraw their most competitive deals for new customers.
Obtaining funding from the money markets has become more costly for banks as a result of the uncertainty in financial markets and a shortage of funds caused by the global credit crisis.
"This is good news for those borrowers with mortgages tracking the Bank base rate," said Michael Coogan, director general of the Council of Mortgage Lenders.
"But in these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders."
Before the rate decision, Alliance & Leicester said it was raising rates on its entire mortgage range for the second time this week.
Nationwide said it was raising interest rates on some of its fixed-rate products by between 0.12% and 0.32% from Friday.
Inflation risk
BBC economics editor Stephanie Flanders says that the quarter of a percentage point rate cut indicates that the state of the UK economy is broadly in line with the Bank's expectations.
That translates as slowing annual economic growth of between 1.5% and 1.75% this year, but not a recession, although inflationary pressures would still remain a problem.
Credit conditions have tightened and the availability of credit appears to be worsening
Bank of England
The Bank said inflation could remain above the government's target of 2%, but should fall back, even if the price of oil and other commodities remain at their current high levels.
It did not mention the housing market in its statement, but analysts said recent downbeat news on property prices had influenced the nine-strong MPC.
The Halifax, the UK's largest lender, said on Tuesday that house prices fell by 2.5% in March, the biggest monthly decline since September 1992.
"The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action," said Stuart Porteous, head of economics at RBS.
It is the central bank's third cut in interest rates since early December.
The Bank said that disruption in financial markets and tighter credit conditions could lead to a slowdown in the wider economy.
The largest mortgage lenders say they will pass on the cut to their mortgage customers who pay variable rates.
Decision welcomed
Business groups welcomed the decision and called for further cuts to shore up growth.
"It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses," said David Kern, economic adviser to the British Chambers of Commerce.
The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action
Stuart Porteous, RBS
"Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already."
The cut had been widely forecast by economists.
"So far the Bank's gradual approach to cutting rates has been the right one," said Martin Temple, chairman of the EEF manufacturers' group.
"But, given how quickly the situation is changing, there are now greater risks to business and consumer confidence."
Mortgage rates
The UK's biggest mortgage lenders responded quickly, saying they would cut their standard variable mortgage rates by the full quarter of a percentage point.
Their mortgage rates which track the Bank of England's base rate will be cut automatically also.
Irresponsible lending is the cause of most of our current financial issues
Clive, Woking, UK
The lenders that have said they will do this are the Halifax, Nationwide, Bank of Scotland, Britannia, Lloyds TSB, Cheltenham & Gloucester, First Direct, Royal Bank of Scotland, NatWest and Woolwich.
Most of the rest say they say they will take from a few days to two weeks to decide how to respond.
Despite this widely anticipated move by the Bank of England, many mortgage lenders have in recent weeks had to withdraw their most competitive deals for new customers.
Obtaining funding from the money markets has become more costly for banks as a result of the uncertainty in financial markets and a shortage of funds caused by the global credit crisis.
"This is good news for those borrowers with mortgages tracking the Bank base rate," said Michael Coogan, director general of the Council of Mortgage Lenders.
"But in these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders."
Before the rate decision, Alliance & Leicester said it was raising rates on its entire mortgage range for the second time this week.
Nationwide said it was raising interest rates on some of its fixed-rate products by between 0.12% and 0.32% from Friday.
Inflation risk
BBC economics editor Stephanie Flanders says that the quarter of a percentage point rate cut indicates that the state of the UK economy is broadly in line with the Bank's expectations.
That translates as slowing annual economic growth of between 1.5% and 1.75% this year, but not a recession, although inflationary pressures would still remain a problem.
Credit conditions have tightened and the availability of credit appears to be worsening
Bank of England
The Bank said inflation could remain above the government's target of 2%, but should fall back, even if the price of oil and other commodities remain at their current high levels.
It did not mention the housing market in its statement, but analysts said recent downbeat news on property prices had influenced the nine-strong MPC.
The Halifax, the UK's largest lender, said on Tuesday that house prices fell by 2.5% in March, the biggest monthly decline since September 1992.
"The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action," said Stuart Porteous, head of economics at RBS.
Extra £225m to beat fuel poverty
Up to 100,000 households could be helped with their fuel bills under a deal agreed between the UK's big six energy companies and the government.
The energy firms have agreed to boost their collective annual spending on social assistance programmes by £225m over the next three years.
Spending will go up from £50m in the past financial year to £100m this year, £125m in 2009-10 and £150m in 2010-11.
The deal was brokered by Energy Secretary John Hutton.
'Eradicating fuel poverty'
If all the extra money was used to offset bills it could remove up to 100,000 homes from fuel poverty, although fewer would benefit if it was spent on more permanent energy efficiency measures.
I do not underestimate the difficulties and anxiety that rising energy prices can cause
John Hutton, Energy Secretary
But consumer group Energywatch recently said social tariffs reached only one in 15 of the most vulnerable households.
A home is judged to be in fuel poverty if 10% or more of the household income is spent on energy bills.
The big six energy firms are British Gas, E.On, Scottish Power, Scottish & Southern, EDF, and NPower.
Legal action
"I do not underestimate the difficulties and anxiety that rising energy prices can cause but I believe that this extra cash, coupled with ensuring we have the most competitive market possible, will help us toward our goal of eradicating fuel poverty in the UK," said Mr Hutton.
The extra assistance will be targeted at households on low incomes which are most vulnerable to fuel poverty, including the elderly.
In 2008-9, the government is increasing winter fuel payments to £250 for over-60s, and to £400 for over-80s.
Earlier this week, two charities said they were taking legal action against the government for not doing enough to help people hit by rising fuel prices.
Friends of the Earth and Help the Aged are bringing the joint legal challenge to end "the misery of fuel poverty".
Price rises
All six big energy suppliers have announced significant price rises since the start of the year.
This move is very helpful but won't, on its own, end fuel poverty
Peter Lehmann, former chairman of the Fuel Poverty Advisory Group
Scottish and Southern Energy was the last to make the move with an average 14.2% increase in electricity bills, and a 15.8% lift in gas charges for domestic customers on 1 April.
In early January, Npower put prices up for its electricity customers by 12.7%, while its gas price rose by 17.2%. EDF put up electricity tariffs by 7.9% and gas prices by 12.9%. British Gas increased gas and electricity prices by 15%.
Scottish Power increased gas bills by 15% and electricity bills by 14%, and E.On put up gas bills by 15% and electricity tariffs by 9.7%.
Mixed reaction
Chancellor Alistair Darling announced an aim to encourage the energy companies to increase social tariffs to £150m a year in the Budget.
The deal with the energy companies runs up to 2011, but the government expects the assistance to continue at the level of at least £150m a year.
"This move is very helpful but won't, on its own, end fuel poverty," said Peter Lehmann, former chairman of the Fuel Poverty Advisory Group, which has called on the government to better target money to help vulnerable households.
Ann Robinson, director of consumer policy at price comparison website USwitch.com, said the extra help was dwarfed by rising bills.
"This is welcome but falls well short of the 500,000 additional households plunged into fuel poverty by the 15% increase to household energy bills this year."
The energy firms have agreed to boost their collective annual spending on social assistance programmes by £225m over the next three years.
Spending will go up from £50m in the past financial year to £100m this year, £125m in 2009-10 and £150m in 2010-11.
The deal was brokered by Energy Secretary John Hutton.
'Eradicating fuel poverty'
If all the extra money was used to offset bills it could remove up to 100,000 homes from fuel poverty, although fewer would benefit if it was spent on more permanent energy efficiency measures.
I do not underestimate the difficulties and anxiety that rising energy prices can cause
John Hutton, Energy Secretary
But consumer group Energywatch recently said social tariffs reached only one in 15 of the most vulnerable households.
A home is judged to be in fuel poverty if 10% or more of the household income is spent on energy bills.
The big six energy firms are British Gas, E.On, Scottish Power, Scottish & Southern, EDF, and NPower.
Legal action
"I do not underestimate the difficulties and anxiety that rising energy prices can cause but I believe that this extra cash, coupled with ensuring we have the most competitive market possible, will help us toward our goal of eradicating fuel poverty in the UK," said Mr Hutton.
The extra assistance will be targeted at households on low incomes which are most vulnerable to fuel poverty, including the elderly.
In 2008-9, the government is increasing winter fuel payments to £250 for over-60s, and to £400 for over-80s.
Earlier this week, two charities said they were taking legal action against the government for not doing enough to help people hit by rising fuel prices.
Friends of the Earth and Help the Aged are bringing the joint legal challenge to end "the misery of fuel poverty".
Price rises
All six big energy suppliers have announced significant price rises since the start of the year.
This move is very helpful but won't, on its own, end fuel poverty
Peter Lehmann, former chairman of the Fuel Poverty Advisory Group
Scottish and Southern Energy was the last to make the move with an average 14.2% increase in electricity bills, and a 15.8% lift in gas charges for domestic customers on 1 April.
In early January, Npower put prices up for its electricity customers by 12.7%, while its gas price rose by 17.2%. EDF put up electricity tariffs by 7.9% and gas prices by 12.9%. British Gas increased gas and electricity prices by 15%.
Scottish Power increased gas bills by 15% and electricity bills by 14%, and E.On put up gas bills by 15% and electricity tariffs by 9.7%.
Mixed reaction
Chancellor Alistair Darling announced an aim to encourage the energy companies to increase social tariffs to £150m a year in the Budget.
The deal with the energy companies runs up to 2011, but the government expects the assistance to continue at the level of at least £150m a year.
"This move is very helpful but won't, on its own, end fuel poverty," said Peter Lehmann, former chairman of the Fuel Poverty Advisory Group, which has called on the government to better target money to help vulnerable households.
Ann Robinson, director of consumer policy at price comparison website USwitch.com, said the extra help was dwarfed by rising bills.
"This is welcome but falls well short of the 500,000 additional households plunged into fuel poverty by the 15% increase to household energy bills this year."
Thursday 3 April 2008
Zopa is banks most threatening non bank
Zopa beats PayPal, Wal-Mart, Vodafone and Prosper as the biggest threat to banks across the world. Social lending pioneer Zopa (uk.zopa.com) is delighted to announce it has just scooped a major international award from the retail banking industry by being voted as their “Most threatening non-bank competitor”.
Zopa won the award ahead of an impressive list of runners-up including PayPal, Wal-Mart, Vodafone and Prosper. The awards were run as part of the 26th Retail Banker International Forum 2008 event. Douglas Doulton, CEO of Zopa said: “This is a very gratifying award to win, especially ahead of such big brands and one of our Social Lending competitors in the USA. Zopa has won a number of major awards from the banking industry now, so clearly we’ve made them look up and take notice. Once we get more of their customers to see the better deals that Social Lending can offer, and the refreshing difference that borrowing and lending with other people can be, these awards may seem rather ironic!”
Zopa won the award ahead of an impressive list of runners-up including PayPal, Wal-Mart, Vodafone and Prosper. The awards were run as part of the 26th Retail Banker International Forum 2008 event. Douglas Doulton, CEO of Zopa said: “This is a very gratifying award to win, especially ahead of such big brands and one of our Social Lending competitors in the USA. Zopa has won a number of major awards from the banking industry now, so clearly we’ve made them look up and take notice. Once we get more of their customers to see the better deals that Social Lending can offer, and the refreshing difference that borrowing and lending with other people can be, these awards may seem rather ironic!”
Mortgage Squeeze to get Worse
Mortgage squeeze 'to get worse'
House prices have stalled in recent months, surveys say
The squeeze on the availability of mortgages is expected to continue in the next three months, the Bank of England has warned.
But it also predicted that demand for home loans was likely to fall slightly during the same period.
The Bank, in its Credit Conditions Survey, said lenders expected the rate of homeowners defaulting to rise.
Lenders have been raising the cost and tightened the availability of mortgages recently because of the credit crunch.
Survey's finding
The survey confirmed that lenders had reduced the availability of mortgages in the three months to mid-March and "expected a slightly larger reduction" over the next three months.
Our banks have suddenly rediscovered the risks of providing credit - but it may be a bit late for their or our good
Robert Peston, BBC Business Editor
But lenders are also expected to cut the amount of ordinary loans, not secured against property, such as credit cards and overdrafts, in the next three months.
Small businesses were also expected to feel the squeeze, with a slightly smaller fall in corporate credit on offer.
Vicky Redwood, of Capital Economics, said the findings increased the chances of the Bank's Monetary Policy Committee cutting interest rates at its next meeting.
"The outlook for economic growth has deteriorated enough to prompt a rate cut next week," she said.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "This supports the case for the Bank of England taking further action. It is conceivable that they may cut interest rates again next week.
"If not, it is almost a certainty that rates will cut to 4.5% by the summer."
Facts and figures
The survey asked lenders about their predictions for mortgage availability over the next quarter of a year. A balance of plus 43% thought that availability would tighten.
A balance of plus 31% said they had cut lending rather than increased it in the first three months of 2008.
Many put this down to the changing economic outlook and the changing appetite for risk.
Meanwhile demand for home loans was broadly unchanged over the past three months, the survey said.
Some 16% more lenders expected this to start falling in the next quarter.
All change
The credit crunch has meant that mortgage providers have been far less likely to lend to each other, leading to a cut in the number of mortgages available.
On Wednesday, First Direct, the Co-operative and Lehman Brothers' Southern Pacific and Preferred Mortgages all announced they were suspending some mortgage offers.
They claimed they were being swamped with demand after maintaining competitive rates. Most lenders have lifted rates, despite the Bank of England's cuts in the base rate.
House prices have stalled in recent months, surveys say
The squeeze on the availability of mortgages is expected to continue in the next three months, the Bank of England has warned.
But it also predicted that demand for home loans was likely to fall slightly during the same period.
The Bank, in its Credit Conditions Survey, said lenders expected the rate of homeowners defaulting to rise.
Lenders have been raising the cost and tightened the availability of mortgages recently because of the credit crunch.
Survey's finding
The survey confirmed that lenders had reduced the availability of mortgages in the three months to mid-March and "expected a slightly larger reduction" over the next three months.
Our banks have suddenly rediscovered the risks of providing credit - but it may be a bit late for their or our good
Robert Peston, BBC Business Editor
But lenders are also expected to cut the amount of ordinary loans, not secured against property, such as credit cards and overdrafts, in the next three months.
Small businesses were also expected to feel the squeeze, with a slightly smaller fall in corporate credit on offer.
Vicky Redwood, of Capital Economics, said the findings increased the chances of the Bank's Monetary Policy Committee cutting interest rates at its next meeting.
"The outlook for economic growth has deteriorated enough to prompt a rate cut next week," she said.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "This supports the case for the Bank of England taking further action. It is conceivable that they may cut interest rates again next week.
"If not, it is almost a certainty that rates will cut to 4.5% by the summer."
Facts and figures
The survey asked lenders about their predictions for mortgage availability over the next quarter of a year. A balance of plus 43% thought that availability would tighten.
A balance of plus 31% said they had cut lending rather than increased it in the first three months of 2008.
Many put this down to the changing economic outlook and the changing appetite for risk.
Meanwhile demand for home loans was broadly unchanged over the past three months, the survey said.
Some 16% more lenders expected this to start falling in the next quarter.
All change
The credit crunch has meant that mortgage providers have been far less likely to lend to each other, leading to a cut in the number of mortgages available.
On Wednesday, First Direct, the Co-operative and Lehman Brothers' Southern Pacific and Preferred Mortgages all announced they were suspending some mortgage offers.
They claimed they were being swamped with demand after maintaining competitive rates. Most lenders have lifted rates, despite the Bank of England's cuts in the base rate.
Wednesday 2 April 2008
First Direct Withdraws from Mortgage Market
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 usual levels.
Historic highs
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from non-customers," said First Direct chief executive Chris Pilling.
"Rather than increase interest rates dramatically to discourage new applications, we've decided to withdraw temporarily from offering mortgages to non-customers until we've cleared the backlog."
As a result of the credit crisis, the interest rates at which banks lend money to each other are unusually far above the Bank of England's base lending rate.
That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.
First Direct is the first major lender to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.
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 usual levels.
Historic highs
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from non-customers," said First Direct chief executive Chris Pilling.
"Rather than increase interest rates dramatically to discourage new applications, we've decided to withdraw temporarily from offering mortgages to non-customers until we've cleared the backlog."
As a result of the credit crisis, the interest rates at which banks lend money to each other are unusually far above the Bank of England's base lending rate.
That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.
First Direct is the first major lender to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.
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