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northern rock on the news begging for cash
Comments
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Warning ..... I'm a peri-menopausal axe-wielding maniac
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MarkyMarkD wrote: »Abbey is the only prime lender to have increased its variable rates for new mortgages.
Err, Hallifax, Standard Life"Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
MarkyMarkD wrote: »NR's bad debts are far better than many other prime lenders. To call them sub-prime is mis-understanding the expression.
The US sub-prime disaster was based on lending people far more than they could realistically afford, on very low short-term fixed rates. When rates expired, the borrowers couldn't make the payments and defaulted.
That's not what's happening here. The UK sub-prime "disaster" (and it's nowhere near that at this stage) is causing sub-prime lenders to price their loans up significantly, primarily due to the LIBOR rates the lenders are having to pay to get funding. And some sub-prime lenders will be unable to securitise their mortgages, and will go bust - indeed, one already has. But again, no individual savers have lost any money, because the institution involved wasn't funded by retail savers.
Abbey is the only prime lender to have increased its variable rates for new mortgages.
If NR was genuinely facing a funding crisis, they would have stopped lending. They haven't.
All that's happened is that the BoE has covered a short-term funding issue. You might recall that they've done this for Barclays a few weeks ago and, indeed, they do it all the time for various banks.
Mark, to repeat my point: There's a reason why NR are the first to be going cap in hand to the BoE.
They can't raise capital on the financial market because no-one trusts them enough to lend them money at reasonable rates.
The reason no-one trusts them to repay a loan is because they have been one of the more 'reckless' lenders. They rely on borrowing money against 'securitized' loans which the market has decided aren't worth what they say they are.
The BoE will give them money not because they think they are a good bet, it's because they desperately want to avoid a systemic crisis in the banking system.
NR supposedly account for 1 in 5 mortgages in the UK and if they defaulted on loan obligations it would be a catastrophe for banking.
Hence the BoE will give them enough cash to stay liquid in the short term and we can expect a takeover by another bank just as soon as The Powers That Be can organise it.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
"The Bank (NR) has had difficulty raising money to finance its lending"
Translation - everyone in the market for lending money is recoiling at the moment. So ... there is little around to borrow. NR has promised to lend money on the assumption it can borrow from "the market". Some of those who promised to lend money to NR have now withdrawn that promise. As a result, NR have asked the BoE if it will lend the money.
The BoE has looked at NR as a customer and assessed its creditworthiness. Following a "credit check" (far more rigorous than that faced by individual borrowers) the BoE considers that NR is a good risk - so the BoE has lent NR some money.Warning ..... I'm a peri-menopausal axe-wielding maniac0 -
Debt_Free_Chick wrote: »Sorry ... I meant 800LL0X
Sooooo - in your savvy :rolleyes: financial opinion what would have happened if the BoE hadn't loaned NR the money it needed to stay solvent?
:rotfl:--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
Thanks, Guy. I hadn't seen those two announcements.Guy_Montag wrote: »Err, Hallifax, Standard Life
But these repricing decisions are nothing to do with the lenders' funding problems. They are to do with the COST of that funding. It's a different thing.
They aren't running out of funds. But they are having to pay more for the funds that they can readily borrower. Do you see the difference I'm drawing here?0 -
MarkyMarkD wrote: »The US sub-prime disaster was based on lending people far more than they could realistically afford, on very low short-term fixed rates. When rates expired, the borrowers couldn't make the payments and defaulted.
Initially yes. Now other mortgages not underwritten by Fannie Mae and Freddie Mac are going under such as mortgages too large to be underwriten by them (those taken up by the richer bits of the US middle classes). They weren't sub-prime until their bad spending habits started to catch up with them as mortgage rates rose.MarkyMarkD wrote: »That's not what's happening here. The UK sub-prime "disaster" (and it's nowhere near that at this stage) is causing sub-prime lenders to price their loans up significantly, primarily due to the LIBOR rates the lenders are having to pay to get funding. And some sub-prime lenders will be unable to securitise their mortgages, and will go bust - indeed, one already has. But again, no individual savers have lost any money, because the institution involved wasn't funded by retail savers.
Abbey is the only prime lender to have increased its variable rates for new mortgages.
As I understand it, NRK were forced to raise their rates by about 1% to stop people borrowing (in effect).
According to this it's also Standard Life and Halifax that have raised rates.MarkyMarkD wrote: »If NR was genuinely facing a funding crisis, they would have stopped lending. They haven't.
Oh yes they have!
Where's the credit crunch children?
It's behind you!!!MarkyMarkD wrote: »All that's happened is that the BoE has covered a short-term funding issue. You might recall that they've done this for Barclays a few weeks ago and, indeed, they do it all the time for various banks.
The BoE does provide liquidity all the time. This strikes me as a little more.0 -
They can't raise capital on the financial market because no-one trusts them enough to lend them money at reasonable rates.
They can't raise capital because the markets have recoiled.The reason no-one trusts them to repay a loan is because they have been one of the more 'reckless' lenders. They rely on borrowing money against 'securitized' loans which the market has decided aren't worth what they say they are.
They've gone to the BoE because the amount available in the market to borrow has shrunk. Those who would have lent money are concerned about the ability of their own customers to repay - so they are holding back and not re-lending their own debts into the market.
I would be more concerned about those who have withdrawn lines of credit to the market - what are they afraid of?
The BoE will give them money not because they think they are a good bet, it's because they desperately want to avoid a systemic crisis in the banking system.
Rubbish - if it went t!t$ up then the fundamental credibility of the BoE would be seriously undermined. They don't underwrite institutions like NR without good reason. The BoE aren't that useless ..... are they?Hence the BoE will give them enough cash to stay liquid in the short term and we can expect a takeover by another bank just as soon as The Powers That Be can organise it.
That, I don't disagree with. But that doesn't translate into Savers losing out - nor does it mean that borrowers will have their loans called in Warning ..... I'm a peri-menopausal axe-wielding maniac0 -
Questions are: Will people be queuing to get their money out at 09:00 tomorrow? (happened to Countrywide in America)
and
Is it worth a put or bet in that direction?A house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
Sooooo - in your savvy :rolleyes: financial opinion what would have happened if the BoE hadn't loaned NR the money it needed to stay solvent?
:rotfl:
It's market sentiment ..... there is a fear - not yet based on any real experience - that lenders will start to default.
NR is not and can not be insolvent. If it were, then the BoE is under a statutory obligation to close it down. Warning ..... I'm a peri-menopausal axe-wielding maniac0
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