The Month at a Glance: June 2009

Wednesday, July 01, 2009 5:56 AM

The regulator came out in support of the financial solution, saying that prior to the advent of the new financial instrument the only source of core tier 1 available to societies under its rules was reserves grown from internally generated profits.

It is pleased that societies now have the option of raising core tier 1 capital from external sources, in the same way as banks.

And there was good news for everyone in June 18 when former Royal Bank of Scotland chief Sir Fred Goodwin agreed to slash his pension by pound 200,000 a year. The kind-hearted knight also reduced his pound 703,000 retirement pot by taking a lump sum of pound 2.7m, meaning he will now scrape by on a modest pound 342,500 per year.

There had been widespread calls for Goodwin to renounce some of his payout after the government took control of 70% of RBS following a pound 20bn bailout.

On June 19 Northern Rock announced it was planning to hike the rates on its two, five and 10-year fixed deals, as well as on its buy-to-let products.

Two-year fixed rate deals are now available from 4.19% up to 65% LTV, with five-year fixed rates being available from 5.29%.

The lender's 10-year fixed deals start from 6.09% up to 65% LTV while buy-to-let fixed rate deals now feature rates from 5.99%.

Repossession forecast lowered

June 22 turned out to be another big news day for lenders when it emerged that the Council of Mortgage Lenders had reduced its forecast for repossessions for the year from 75,000 to 65,000.

In making the announcement the organisation stressed that while conditions in the housing and mortgage markets remain extremely challenging existing borrowers are gaining significant benefits from the effect of lower interest rates.

This, taken together with the significant levels of forbearance being shown by lenders and government intervention to improve support for struggling home owners resulted in the CML reducing its forecast.

The organisation now expects around 360,000 mortgages to be in arrears equivalent to 2.5% or more of the balance by the end of the year.

The CML's forecasts for housing transactions and gross lending remain unchanged, at 700,000 transactions and pound 145bn of gross lending.

But the outlook for net lending appears less negative than previously forecast. The CML now expects net lending to fall by only around pound 5bn compared with the pound 25bn contraction the organisation originally anticipated.

A spokesman for the CML said at the time: "A raft of measures taken by the authorities have stabilised the economy and will sow the seeds for recovery over time, including in the housing market. FSA figures show gloomy trend in mortgage arrears "But any improvement is likely to be slow as fiscal, monetary and credit support measures gradually unwind."

The FSA also offered some data on the subject, stating that the number of loans in arrears had shot up by more than a third in a year, reaching 399,000 in Q1 2009.

It said loans in arrears at the end of March rose by 33% compared with the same time last year, and 6% since last December.

The FSA extracted its information from the quarterly Mortgage Lending & Administration Returns it receives, in which some 300 regulated firms are required to lay out details of their mortgage lending activities. The number of new arrears cases fell by 12% to 60,000 compared with the 68,000 seen in Q4 2008 but the figure is still higher than the 54,000 cases the regulator says are generally reported each quarter.

Meanwhile, the FSA says the proportion of the total residential loan book in arrears across all regulated firms rose to 3.64% at the end of Q1 2009 - up by 0.27% compared with the previous quarter and up 1.23% on the same time last year.

Repossessions climbed 13% to 14,825 cases in Q1 2009, but this followed a decline from 13,469 to 13,115 in the second half of last year.

A service of YellowBrix, Inc.

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