View more on these topics

Sub-prime time poses twin threat

It has not been a fun couple of weeks for the sub-prime mortgage market or some global fund managers.

Mortgage brokers and investment advisers have reason to be on their guard for their clients.

There is less confidence across a range of asset classes than just a few weeks ago. In a set of developments which sees sub-prime as the villain of the piece, it is actually not brokers that have the most to worry about.

Two small lenders, Infinity and Unity Home Loans, and one bigger one, DB Mortgages, have withdrawn products from the market to reprice.

For brokers, this means the cost of sub-prime borrowing may rise for clients. Perhaps some smaller lenders may choose to exit indefinitely. The frustration is that because of what might be described as reckless lending in the US, the market in the UK may tighten and become less competitive than it would have, even given rising interest rates.

This has been aggravated by a global fund industry which has invested in geared contracts and instruments which ultimately have been based on less than safe lending.

But most mortgage brokers have probably not seen detriment to clients and unless there is a real drying up of sub-prime availability and a knock-on effect on market confidence, there is no need to panic.

The fortunes of brokers and clients are linked to house prices. A slowdown would be a much greater problem. But brokers would be wise to keep one eye on how the market for lenders develops for the long term. They should consider their business models in the light of the fact that mortgages are being supplied at very tight margins and may not be sustainable.

On the investment side, advisers must be disappointed to see some retail funds affected by investments which fund managers may not have fully understood. It makes a strong case for advisers finding fund managers who can demonstrate the skills for managing new types of assets rather than bandwagon-jumpers who understand return but maybe do not understand risk.


Friends says Resolution deal still on as sales rise

Friends Provident insists its £8.4bn merger plans with Resolution are still on track although it admits it will consider any deal that offers better value to its shareholders.Friends life and pensions chief executive Ben Gunn was keen to reinforce the firm’s commitment as it revealed interim profit growth of 7 per cent.He says: “The boards […]

Improvements on the Way

The performance of the Way Group’s multi-manager range is improving after a poor 2006 that saw three of its funds languish in the fourth quarter.Its cautious portfolio and global blue managed portfolio funds are now up to second quartile while its global red active portfolio fund has climbed into the third quartile.IMS says there have […]

Annuities reach four-year high

Annuity rates have reached their highest level for four years but further rises depend on movements in bond yields, says Annuity Direct managing director Stuart Bayliss.He says improvements in annuity rates are due to a substantial increase in long-term gilt and bond yields and the last six months have seen a succession of rises as […]

UK gilts: Shaken and stirred

Mike Riddell, fixed income portfolio manager at Allianz Global Investors, reviews the performance of the UK government bonds market post-Brexit and assesses its future prospects, as well as giving his outlook for global fixed income markets and yields movements. In addition, he provides a brief analysis of the impact of Brexit and the Bank of […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm