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A week to bury bad news

Two months on since the credit crunch first hit the UK’s shores and job redundancies in the UK mortgage market are starting to make the headlines.

This week has seen three mortgage firms confirm they will have to make job cuts as the fallout from the US sub-prime crisis continues to make an impact.

Tuesday saw broking group Black and White announce it has asked 50 of its 200 staff to consider voluntary redundancy due to revenues being hammered. It cited lenders upping their rates, increased arrangement fees, the withdrawing of lending criteria and reduction of procuration fees as all having significant consequences to its business.

The same day, at 4pm and in the middle of the pre-Budget report, GMAC-RFC announced it would be closing its sub-prime subsidiary High Street Home Loans as well as axing over 260 jobs.

Whilst GMAC will be the first to deny this was a coincidence, the fact that all financial journalists would have had their eyes and ears glued to the TV watching Chancellor Alistair Darling seems like a very convenient way to attempt to bury its bad news.

The lender says it will be cutting 200 jobs at GMAC as well as 66 jobs at HSHL, totalling almost a quarter of GMAC’s workforce. GMAC has reassured brokers and packagers that it will honour all offers made by HSHL.

The next day news emerged that Merrill Lynch subsidiary Wave had also held meetings with staff resulting in the loss of 20 jobs.

The sad fact is with the markets not expected to return to normality until as far away as next April, the industry will have to be ready for even more job cuts as lenders and brokers attempt to adapt their business models to become more efficient.

In other news this week, it has emerged that business tycoon Sir Richard Branson is believed to be in talks to takeover Northern Rock.

Reports in the national press say Branson’s Virgin Group is in discussions with investors in the Middle East and the United States with a view to forming a consortium which would inject funds into the bank in return for a controlling stake.

Money Marketing revealed in January this year that Virgin Money was planning a return to the UK mortgage market. Virgin first launched into the mortgage market in 1998 with the Virgin One account, which combined a current account with a mortgage, but since Virgin One was bought out by Royal Bank of Scotland in 2001, the company has had no presence in the market.

Other interested parties in Northern Rock are believed to include two US investment firms JC Flowers and Cerberus.

If the discussions with Northern Rock are successful, Virgin would take over the day-to-day running of Northern Rock and incorporate it into its Virgin money brand.


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