FinanceTeam

Mortgage market upset by turmoil in sub-prime markets

The realisation by many institutional investors that certain funds based on US sub-prime mortgage lending were not as safe as previously thought, together with reductions in house prices in the US, has caused turmoil in financial markets across the world. Investors in funds that are backed by mortgage lending have become nervous, causing the double effect of a reduction in cash available for credit and an increase in rates.

Loan Rates

Interest rates on certain types of loans have increased in the UK due to pressure in the credit markets. For some lenders, certain loans have been removed completely. Loans affected by this include fixed rate loans and some loans that are designed to reduce in rate over the term of the loan. The mortgage and loan company Northern Rock hit the headlines continuously for 2 weeks in September, with thousands of savers rushing to take out their cash, worrying that they may lose it if the company failed. The UK government was forced to issue extraordinary guarantees in order to stop the panic.

Loan Insurance

Loan insurance was again in the news as the FSA announced the results of it's investigation into the selling of payment protection insurance. The regulatory body looked at 150 firms by mystery shopping them and checking the way they sold PPI products. The initiative is aimed at improving the fairness in which customers are treated.