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The government is set to own around 60% of the Royal Bank of Scotland (RBS) and invest up to £15 billion pounds. RBS in one of the many banks that has been exposed to the bad debt based on U.S sub-prime loans.

Earlier this week the Cheshire Building Society announced that they would no longer be dealing with mortgage brokers as the mortgages they offer “have no obvious point of difference” from the mortgage offered by their new owners the Nationwide Building Society.  

What a week for the financial world. 

Lehman Brothers went in to administration

After 9 months of uncertainty the fallout from the Northern Rock debacle finally hit the mainstream mortgage market in May.  During the early Post Northern Rock months it was those with adverse credit history and mortgage brokers that needed Sub Prime mortgages who felt the squeeze. But mortgage lender’s started to tighten their lending criteria and, one by one, retired from the market.

July Market Overview

Monthly overview June

This year has got off to a strange start. Very quiet for the first two weeks of January, very busy for the last two, then quiet again for the beginning of February. But, clearly, we are living through unique times.

For the first time in nearly 30 years, borrowers are going to have to contend with a market in which there is more demand for mortgages than there is supply of funding. For most of the last three decades, mortgage funding has been abundant and growing all the time.

We have waited to produce January’s update until (a) everyone was back at work finally and (b) for the Bank of England to announce their decision on interest rates.

Not moving the Base Rate this month disappointed a large group of people who are concerned about the economy and who have significant debts but in the medium term interest rates seem likely to will fall two or three times this year to leave us with a sub 5% rate by the end of the year.

So, just 3 weeks left until Christmas as I write this and most economic commentators seem to think that the Bank of England should be offering us a Christmas present of a drop in interest rates tomorrow to acknowledge that times are tough for consumers. Generally, we support that view although, by knowing how focussed the Bank of England are on inflation, they may wait until January before offering such a gesture as it might encourage people to spend more than would be prudent prior to Christmas.