Well it's actually September but we're reviewing the August activity in the mortgage marketplace.

There is certainly plenty to report as world stockmarkets survived a roller coaster ride virtually unscathed as the dirty dealings of the US sub-prime mortgage market finally failed to provide profits and the basis of the arrangements were made public.

Was has been going on for a long time, while making healthy profits for investors, has slowly been creeping closer and closer to the knife edge on which it was based - lending money to people, some of whom were ill equiped to repay those debts. This has not been a problem in the past because rates were set to accomodate the odd non-repayer, but the investors provide the funds for the loans were getting more and more confused about who the money was going to and a downturn in the US housing market, leading to a bout of loan defaulters revealed the truth of the debts and the news was hard swallow. Many investors decided that the market had become far too risky and decided to pull the plug on their funds leaving many mortgage businesses with no cash to lend.

The fund investors we're not limited to US companies and several European and UK companies lost out in these deals and in an attempt to avoid a similar situation the adverse mortgage market in the UK has already tightened it's belt. Consequently mortgages for people with poor credit histories are now harder to come by and lenders are only prepared to advance smaller sums - partly due to thoughts that the UK housing market may already have reached it's peak and is already falling.

But it's not all bad news in the mortgage space - the Bank of England has twice kept interest rates at 5.75% now and the market seems to think that this may be it as far as rate increases are concerned for a while. As a result several fixed rate mortgage deals of 2 years and longer have actually dropped in recent weeks, highlighting confidence in longer term mortgage interest rates.

Return to News index