Banks Bounce on Upbeat Bonanzas

By: Capital Fortune  08/08/2009
Keywords: financial services, mortgage, Property Mortgages

   This week was reporting season for some of our mortgage lenders and major banks both those in taxpayer and shareholder hands.  Barclays began the week along with HSBC, both reporting significant profits of around £3bn for the first 6 months, followed by Lloyds Banking Group and Northern Rock both publishing losses which were not as bad as the City predicted. We finished today with RBS, our online mortgage service lender of the month, broke even at £15million in the black.    This has been a positive 5 days with shares in RBS up almost 10% on Thursday, at one stage on the back of Lloyds results which suggested they had written off as much bad debt as required.   This optimistic outlook is backed up in the housing market in general according to the Financial Times whose housing index was up by 0.1% in July causing more home mortgages UK wide to be applied for. Academics, who compile the index suggested that the result demonstrated the market was nearing the bottom of the trough and that the sharpest falls are behind the UK economy.  They did however temper their enthusiasm by suggesting unemployment was still on the rise and that limited availability of public spending going forward might restrain the recovery.    Indeed looking at information from the National Association of Estate Agents, the number of house hunters registered with their members increased from 192 in July 2008 to 292 in July 2009.  This represents the largest 3 month demand for property since the heady days of late 2007.  There is a suggestion in the report that Building Society valuers are no longer down valuing property – something our London mortgage brokers have yet to see feed through.   Iceland is again in the news following the release of a document first exposed on Wikileaks, the whistleblower website.  The report showed that Kaupthing Bank, one of the institutions as the centre of the country’s banking collapse, was more exposed to its own shareholders rather than the wider market, a shock to the public who were looking to apportion blame to foreign hedge funds. It now looks like the bank lent heavily to its own shareholders with little collateral and often of lax terms.   Bad news for those going on holiday this week at the Bank of England pumped in another £50bn into the economy in their program of quantitive easing.  This now takes them over the £150bn initially suggested by the Chancellor and had the effect of pushing the price of sterling down as markets reacted to the surprise news.  On the positive side the further purchase by the BoE of Government Bonds should put downwards pressure on fixed mortgage rates which are priced in relation to gilt yields.   During the recession, its come clear that we would rather not go on holiday than give up on our Sky subscriptions or mobile phone.  According to the research by Ofcom, almost half have stopped going out for dinner whilst 41% are not going away.  This compares to just 16% who can’t stop watching subscription television or 1 in 10 who can’t do without broadband.

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