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Crackdown looming after the Rock fiasco

The panic over Northern Rock could result in the Government placing limits on how much funding can come from the money markets.

Mehrdad Yousefi, director of distribution and sales at Wave and former head of intermediary mortgages at Alliance & Leicester, says he expects the Government to change the funding regime to stop a similar crisis in the future. He says the Government could detail how much and what type of funding can come from the capital markets.

He says: “The Government will undertake a review of current funding to make sure we do not see a repeat of Northern Rock. They have been extremely unlucky and have not done anything wrong but when the international banking market grinds to a halt, if the bulk of a bank’s lending is reliant upon the capital markets, it is going to create problems.”

Premier Mortgage Service managing director John Malone says the liquidity crunch will cause significant changes in the mortgage market in the next six to 12 months.

He says: “I expect volumes of business to be lower in 2008 and the availability of mortgages will reduce. All lenders will be looking more closely at affordability and criteria. Lenders will look even more closely at distribution channels and they will be looking more at quality rather than quantity.”

Yousefi says most financial institutions will not be growing their asset-based lending in 2008, with the industry being much more cautious.

Commentators believe building societies will see growth curtailed over the next year as many have used securitisation to boost profits. A source says: “Almost all the top 10 building societies will see a drop in growth or no growth at all over the next six to 12 months.”

Building Societies Association director general Adrian Coles says: “Most building societies do not securitise, a few do, but it is a very peripheral way of funding and a small proportion of their activity so we do not anticipate it to be a problem.”


Cameron supports BoE and FSA’s action on Northern Rock but urges more transparency

Conservative Party leader David Cameron says he fully supports the way the Bank of England and the FSA have handled the Northern Rock funding crisis but says there are important questions which need answering.Speaking at a KPMG event this week, Cameron said the immediate priority was to reassure investors about the safety of their deposits […]

Out of focus

Amid the welter of words that have followed the publication of the retail distribution review, most of the attention has focused on the technical aspects of the proposals. Very little time has been spent on trying to understand what consumers actually want.

Running round the Rock

One saver with Northern Rock said this week that, having seen what happened with Equitable Life he was rushing to get his money out of the Rock.

Harrison says FSA loaded RDR bases

Positive Solutions outgoing executive chairman David Harrison has slammed the FSA, accusing it of asking loaded questions in the retail distribution review.At Positive Solutions’ annual partner forum in Birmingham last week, Harrison also hit out at the Chartered Insurance Institute.He said: “It is no good asking members of professional societies if they think professionalism is […]

Scheme pays explained

By Fiona Hanrahan, senior product insight and technical support analyst We’ve received lots of queries on scheme pays and when it can be used. This article explains how it works and the conditions which apply. What is ‘scheme pays’? If an individual exceeds the annual allowance (AA) and an AA tax charge is due, they […]


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