LONDON (Reuters) - Virgin Group VA.UL will return to the mortgage market and obtain a license to operate a high street bank, the group's billionaire founder Richard Branson told the Times newspaper.
"We are going to get back into the mortgage business and we will become a bank either by acquisition or by getting our own banking license," he said.
"You will see us become a consumer bank within the next couple of years."
Branson's Virgin Group, which led a failed attempt to take over ailing lender Northern Rock last year, sold its mortgage finance arm, Virgin One, to RBS (RBS.L) in 2003.
Branson, of the government's business advisers, said he was urging Prime Minister Gordon Brown to make the liquidity crisis a top priority.
"The prime minister realizes that the most dangerous thing is the liquidity issue," Branson told the newspaper. "We cannot allow perfectly decent companies go to the wall just because they cannot get liquidity."
Branson was giving the interview while flying round the world last week to promote the launch of his newest airline, V Australia.
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Tuesday, March 10, 2009
US backs bailout bill
WASHINGTON (Reuters) - Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote on Thursday in the U.S. House of Representatives.
Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments made this week to limit its scope, including one restricting it to existing primary residence mortgages, not future loans.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain there.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.
About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported on Thursday.
President Barack Obama on Wednesday launched a $75 billion foreclosure relief plan, part of a $275 billion housing stimulus program announced last month.
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Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments made this week to limit its scope, including one restricting it to existing primary residence mortgages, not future loans.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain there.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.
About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported on Thursday.
President Barack Obama on Wednesday launched a $75 billion foreclosure relief plan, part of a $275 billion housing stimulus program announced last month.
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Thursday, March 5, 2009
Interest rate cut
A mortgage fix could pay off in the long term
It all depends on what you want from your mortgage, says Kara Gammell
By Kara Gammell
Last Updated: 3:04PM GMT 05 Mar 2009
Interest rates may be at an all-time low, but many borrowers are still struggling to snap up competitive mortgage deals.
Those looking to remortgage, or take out their first loan, may be tempted by some of the cheaper tracker rates on offer – but many advisers say they may be better off in the long run by opting for a more expensive fixed-rate deal.
Melanie Bien, director of independent mortgage broker Savills Private Finance, said: "The best mortgage rate for you will very much depend on your own particular circumstances."
Some borrowers are currently paying low rates because their loan is linked to the lender's standard variable rate (SVR). But sticking to an SVR could backfire. Matt Andrews of Moneyworkout said: "Beware of the SVR handcuffs. If you are thinking of sitting on your SVR, you must also think about your property value."
As property values fall the percentage of your borrowing against your mortgage – loan to value or LTV – increases, he said, and this affects borrowers in two ways.
"Firstly, many lenders tier their interest rates, with a higher rate for a higher loan to value. You could slip into a more expensive category if you wait. And many lenders are not lending if your loan to value is greater than 80pc. Those with less equity could find it impossible to remortgage, and find themselves handcuffed to the standard variable rate, hoping it doesn’t go up."
He added: "You may have a fantastic SVR now, but look at your loan to value, look at property prices in your area and how they are moving, think about your needs over the next few years, and if your mortgage may cross the 80pc boundary with the fall in property prices, you may want to consider fixing now, before its too late."
Fixed-rate deals also offer security to first-time buyers and those whose budgets are stretched, as they have the peace of mind that monthly mortgage payments won't suddenly rise.
Ms Bien said: "While two-year fixes tend to be the cheapest fixed-rate deals and the most popular, it may be worth fixing for a longer period. While interest rates remain low now – and may fall further this week – there is no guarantee that they will be as low two years from now when you need to remortgage."
In fact, many economists are expecting rates to rise over this period, particularly if, as expected, inflation starts to pick up again over the medium term. What's more, few are expecting house prices to recover in the near future. This could leave those remortgaging in two years' time in a difficult position, with less equity in their home and interest rates rising.
Ms Bien said: "If lenders are still not offering mortgage to those with less than 10 per cent equity in their home, you could find it difficult to remortgage, leaving you at the mercy of your lender's standard variable rate."
For first-time buyers, a very competitive deal available is the five-year fixed rate from the Post Office at 6.01 per cent. This is available to those with just a 10 per cent deposit and has a £599 fee. If you can afford to borrow only 85 per cent of your home's value, Leeds Building Society offers a five-year fix at 5.25 per cent with a £199 fee.
For those who don't need the certainty of a fix, a base-rate tracker may look more attractive as starting rates are significantly lower. Many are expecting interest rates to remain low for a year or 18 months, giving home owners the benefit of cheaper monthly mortgage payments.
However Ms Bien said that borrowers should be wary of trackers that have penalties after three years, as these may give borrowers less flexibility to switch if rates start to rise sharply.
Woolwich currently offers a tracker charging 2.99 percentage points over the Bank Rate, for the term, giving a current rate of 3.99 per cent. There will be penalties to pay if you remortgage within three years. This rate is available up to 70 per cent loan-to-value (LTV) with a £995 fee. Nationwide has a two-year tracker at 2.83 percentage points over base, giving a rate of 3.83 per cent with a £995 fee, available up to 60 per cent LTV.
Ms Bien said: "For those with significant equity in their home of at least 40 per cent, the pick of mortgage deals are available." Alliance & Leicester, for example, offers 2.04 percentage points above the base rate for two years, giving a rate of 3.04 per cent. However home owners pay a fee equivalent to 2 per cent of the sum they are borrowing.
This is only available to those with 60 per cent LTV.
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It all depends on what you want from your mortgage, says Kara Gammell
By Kara Gammell
Last Updated: 3:04PM GMT 05 Mar 2009
Interest rates may be at an all-time low, but many borrowers are still struggling to snap up competitive mortgage deals.
Those looking to remortgage, or take out their first loan, may be tempted by some of the cheaper tracker rates on offer – but many advisers say they may be better off in the long run by opting for a more expensive fixed-rate deal.
Melanie Bien, director of independent mortgage broker Savills Private Finance, said: "The best mortgage rate for you will very much depend on your own particular circumstances."
Some borrowers are currently paying low rates because their loan is linked to the lender's standard variable rate (SVR). But sticking to an SVR could backfire. Matt Andrews of Moneyworkout said: "Beware of the SVR handcuffs. If you are thinking of sitting on your SVR, you must also think about your property value."
As property values fall the percentage of your borrowing against your mortgage – loan to value or LTV – increases, he said, and this affects borrowers in two ways.
"Firstly, many lenders tier their interest rates, with a higher rate for a higher loan to value. You could slip into a more expensive category if you wait. And many lenders are not lending if your loan to value is greater than 80pc. Those with less equity could find it impossible to remortgage, and find themselves handcuffed to the standard variable rate, hoping it doesn’t go up."
He added: "You may have a fantastic SVR now, but look at your loan to value, look at property prices in your area and how they are moving, think about your needs over the next few years, and if your mortgage may cross the 80pc boundary with the fall in property prices, you may want to consider fixing now, before its too late."
Fixed-rate deals also offer security to first-time buyers and those whose budgets are stretched, as they have the peace of mind that monthly mortgage payments won't suddenly rise.
Ms Bien said: "While two-year fixes tend to be the cheapest fixed-rate deals and the most popular, it may be worth fixing for a longer period. While interest rates remain low now – and may fall further this week – there is no guarantee that they will be as low two years from now when you need to remortgage."
In fact, many economists are expecting rates to rise over this period, particularly if, as expected, inflation starts to pick up again over the medium term. What's more, few are expecting house prices to recover in the near future. This could leave those remortgaging in two years' time in a difficult position, with less equity in their home and interest rates rising.
Ms Bien said: "If lenders are still not offering mortgage to those with less than 10 per cent equity in their home, you could find it difficult to remortgage, leaving you at the mercy of your lender's standard variable rate."
For first-time buyers, a very competitive deal available is the five-year fixed rate from the Post Office at 6.01 per cent. This is available to those with just a 10 per cent deposit and has a £599 fee. If you can afford to borrow only 85 per cent of your home's value, Leeds Building Society offers a five-year fix at 5.25 per cent with a £199 fee.
For those who don't need the certainty of a fix, a base-rate tracker may look more attractive as starting rates are significantly lower. Many are expecting interest rates to remain low for a year or 18 months, giving home owners the benefit of cheaper monthly mortgage payments.
However Ms Bien said that borrowers should be wary of trackers that have penalties after three years, as these may give borrowers less flexibility to switch if rates start to rise sharply.
Woolwich currently offers a tracker charging 2.99 percentage points over the Bank Rate, for the term, giving a current rate of 3.99 per cent. There will be penalties to pay if you remortgage within three years. This rate is available up to 70 per cent loan-to-value (LTV) with a £995 fee. Nationwide has a two-year tracker at 2.83 percentage points over base, giving a rate of 3.83 per cent with a £995 fee, available up to 60 per cent LTV.
Ms Bien said: "For those with significant equity in their home of at least 40 per cent, the pick of mortgage deals are available." Alliance & Leicester, for example, offers 2.04 percentage points above the base rate for two years, giving a rate of 3.04 per cent. However home owners pay a fee equivalent to 2 per cent of the sum they are borrowing.
This is only available to those with 60 per cent LTV.
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Wednesday, March 4, 2009
U.S Homeowners struggling
One in five U.S. homeowners with mortgages in america owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows.
About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.
Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows.
First American said the value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half the decline in California. Forty-three U.S. states and Washington, D.C., were included in the study.
While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation.
"The economic slowdown is broadening," said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. "As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country."
Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.
Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington, D.C., had a 44 percent increase.
"Even I continue to be surprised at the tentacles of this financial and economic debacle," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices."
Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation's unemployment rate to rise above 9 percent before the recession ends, up from January's 7.6 percent.
About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.
Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows.
First American said the value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half the decline in California. Forty-three U.S. states and Washington, D.C., were included in the study.
While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation.
"The economic slowdown is broadening," said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. "As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country."
Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.
Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington, D.C., had a 44 percent increase.
"Even I continue to be surprised at the tentacles of this financial and economic debacle," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices."
Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation's unemployment rate to rise above 9 percent before the recession ends, up from January's 7.6 percent.
Dollar at new high
The US dollar extended gains to hit a fresh 3-year high against a basket of currencies on Monday as another U.S. bailout for American International Group sparked a flight into perceived safer assets.
The troubled insurer also reported a record fourth quarter loss of $61.7 billion, extending hefty stock market losses.
The dollar index .DXY hit a high of 88.956, its highest since April 2006 as European stock markets fell 4 percent .FTEU3. The U.S. currency's gains also took the pound to its lowest in just over a month at $1.4036.
"There's no good news out there and that is leaving the euro and sterling looking really heavy right now. Stock markets are working in the dollar's favour," a London-based trader said.
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The troubled insurer also reported a record fourth quarter loss of $61.7 billion, extending hefty stock market losses.
The dollar index .DXY hit a high of 88.956, its highest since April 2006 as European stock markets fell 4 percent .FTEU3. The U.S. currency's gains also took the pound to its lowest in just over a month at $1.4036
"There's no good news out there and that is leaving the euro and sterling looking really heavy right now. Stock markets are working in the dollar's favour," a London-based trader said.
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Tuesday, March 3, 2009
The euro extended losses against the dollar on Tuesday as U.S. stocks turned negative after Federal Reserve Chairman Ben Bernanke said more must be done to secure financial market stability.
Euro buying hit a session low of $1.2522, according to Reuters data, after earlier rising as high as $1.2677. It was last changing hands at $1.2542, down 0.3 percent on the day.
Bernanke told Congress the government must take bold action to fight the crisis even if it means a rise in government debt. Some analysts said that was good for the dollar buyers because it suggested U.S. authorities would do whatever it takes to help the economy recover.
A weak U.S. housing report and Bernanke's warning that the near-term economic prospects remain uncertain, also dulled risk-taking, prompting investors to move away from stocks and other currencies and toward the relative safety of the dollar.
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Euro buying hit a session low of $1.2522
Bernanke told Congress the government must take bold action to fight the crisis even if it means a rise in government debt. Some analysts said that was good for the dollar buyers because it suggested U.S. authorities would do whatever it takes to help the economy recover.
A weak U.S. housing report and Bernanke's warning that the near-term economic prospects remain uncertain, also dulled risk-taking, prompting investors to move away from stocks and other currencies and toward the relative safety of the dollar.
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Monday, March 2, 2009
Spanish Lending falls again
The fall in Spanish home sales accelerated in the final quarter of 2008, a report showed on Tuesday, reflecting a collapsing property sector that has helped tip the fourth-largest euro zone economy into recession.
Some 113,274 homes were bought and sold in the fourth quarter, down 13.5 percent from 130,884 in the third, Spain's College of Registrars said.
The drop was sharper than a 8.6 percent fall between the second and third quarters.
For the year, 561,420 sales were registered, down 28.8 percent from 2007.
The average value of Spanish mortgages declined for a fourth consecutive quarter, falling 1.84 percent year on year to 136,148 euros ($174,400), the college said.
Average mortgage values fell 6 percent in 2008, it said.
Figures from Spain's National Statistics Institute published last month showed mortgages in Spain fell 23 percent in November compared to a year earlier, reflecting both weaker demand and tighter bank lending.
Most analysts say Spanish house prices will fall by up to 30 percent from their highs, though some see greater declines as possible as the end of a decade-long residential construction boom coincides with credit market turmoil. Add into this the cost of buying euros and the Spanish property market seems to be in some pain.
Pounds to Euros exchange rate = 1.1128
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Some 113,274 homes were bought and sold in the fourth quarter, down 13.5 percent from 130,884 in the third, Spain's College of Registrars said.
The drop was sharper than a 8.6 percent fall between the second and third quarters.
For the year, 561,420 sales were registered, down 28.8 percent from 2007.
The average value of Spanish mortgages declined for a fourth consecutive quarter, falling 1.84 percent year on year to 136,148 euros ($174,400), the college said.
Average mortgage values fell 6 percent in 2008, it said.
Figures from Spain's National Statistics Institute published last month showed mortgages in Spain fell 23 percent in November compared to a year earlier, reflecting both weaker demand and tighter bank lending.
Most analysts say Spanish house prices will fall by up to 30 percent from their highs, though some see greater declines as possible as the end of a decade-long residential construction boom coincides with credit market turmoil. Add into this the cost of buying euros and the Spanish property market seems to be in some pain.
Pounds to Euros exchange rate = 1.1128
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