The Abbey National announced rate cuts on some of its mortgage products at the weekend as well as bringing out two new fixed rate mortgage offers.
Some of the Abbey National two year tracker mortgages have seen rate reductions of up to 0.2 percent, with the lowest introductory rate now standing at 6.04 percent. One of the new mortgages offered by the Abbey is a 10 year fixed rate mortgage, with a lowest rate available of 6.25 percent.
An Abbey National spokesman explained that it was the strength the big high street name had in the mortgage market that made these rate cuts possible. The bank also feels that the 10 year fixed rate mortgage is going to prove very popular, combining as it does an attractive interest rate and a long fixed term period.
The fallout from the ongoing credit crunch has really hit Peoples Choice hard, pushing them to file for Chapter 11 in the US.
Peoples Choice are one of the many subprime lenders who have been riding the wave of second tier lending, that is to those who are a greater risk than normal, only to find the waves crashing over their heads as defaults and lack of extra funding leave them unable to continue.
The company has filed for Chapter 11 so they can take some time out to reorganise themselves and regain stability. During this time their creditors are kept at bay, thus freeing the organisation up to get their house in order and ideally come out better than before.
One of the biggest problems with subprime lending, and one that Peoples Choice will certainly have seen, is that a lack of affordability leads to lenders offering more and more money as an incentive to use them, with 120 percent mortgages not uncommon. The borrower relishes the extra money but often finds it has gone very quickly, the repayments are higher than they would normally have been and the value of their property does not cover the amount borrowed. A recipe for disaster as soon as house values stop growing at a high rate, which is what has happened in the USA recently.
Half year results from the Alliance and Leicester have shown profits at just GBP2 million, down from GBP290 million for the same time last year.
The biggest reason for this massive fall is the writedown of assets that the Alliance and Leicester carried out. This was done because of the worldwide credit crunch that has sent their asset values fall. The good news is that the market had been pre-warned about the write down so, even though it was a little more than was expected, industry experts were not too surprised.
Although investments have proved a difficult area for the Alliance and Leicester their mortgage business appears to be stable as do both personal and business banking. Numbers of mortgages provided are down but the quality is still good meaning bad debts are unlikely to cut into the bottom line.