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LIBOR could indicate mortgage market recovery

Responding to the news that LIBOR fell on Wednesday following the European Central Bank (ECB) and the Swiss National Bank’s $254 billion (£145.7 billion) injection into the wholesale funding markets, financial solutions company Think Money (http://www.thinkmoney.com/) commented that this could mark the start of a recovery in the mortgages and loans market, so long as the conditions remain in place for lenders to continue to do business.

Despite last week’s half-point base rate drop, which was aimed in part at encouraging lenders to offer lower interest rates on their mortgages and other credit products, three-month sterling LIBOR – the rate most banks base their mortgage rates on – has been slow to respond.

LIBOR reflects the willingness of financial institutions to lend money to each other – and therefore the amount of cash flow in the industry. As such, it affects the levels of loans, mortgages and other forms of credit they are willing to offer to consumers. In short, the higher the LIBOR is, the more expensive it is to obtain the funds necessary for lending.

But on Wednesday, LIBOR fell from 6.249% to 6.21%, following around four weeks of continuous rises - not a huge drop, but one that could indicate that banks may be becoming more inclined to lend to each other, following the first cash injections from the Government’s bailout scheme.

A spokesperson for Think Money said: “This is a small but encouraging sign that the mortgage market may be on its way to improved levels of lending. What’s more, it’s evidence that the first stage of the Government’s bailout scheme may be working, which is good news for the economy in general.

“The main obstacle to mortgage lending over the past year has been lenders’ unwillingness to take risks. That’s the main factor behind the short supply of mortgages on the market, and the reason banks weren’t lending to each other, hence the high LIBOR.

“The aim of the bank bailout is to artificially increase cash flow within the financial markets, which should then give lenders an incentive to start doing more business with each other and with consumers – and it would appear that it has worked, for the time being at least.

“What we will now be looking out for is whether the LIBOR will continue to fall, and by how much. If it can drop to a figure somewhere near the 4.5% base rate, we may begin to see healthy levels of mortgage lending taking place once again. But the continued success of the banking bailout scheme will be central to ensuring this can occur.”

The spokesperson added that although market conditions are currently difficult, there are still plenty of mortgage deals available. “We haven’t seen a complete freeze in mortgage lending – just a tightening in lending criteria across the market. Lenders still need to be competitive to do business, so the deals are still very much there – it may just take longer to find the right deal.

“Despite the uncertainty in the housing market, now could be a good time for first-time buyers, since house prices are relatively low, and therefore mortgages are relatively cheap. If house prices do begin to rise again soon, it could prove to be a very good move financially.”

Useful Resources for editors:

Homepage: http://www.thinkmoney.com/
Mortgage page: http://www.thinkmoney.com/mortgage/
Remortgage page: http://www.thinkmoney.com/mortgage/remortgage.asp

HSBC LAUNCHES FULL ASSET-BASED LENDING PROPOSITION IN THE UK

HSBC Commercial Bank today announced the launch of a specialist asset-based lending proposition and the creation of a dedicated lending team. The division – led by new appointment Graham Moffitt and supported by Barry Lee and Bruce Richards - will strategically complement HSBC’s corporate business offering in the UK, supporting business customers with a £25m+ turnover, and forms part of the recently restructured HSBC Invoice Finance business.

Structures will always be receivables led, but the introduction of the new team now gives HSBC corporate business customers the opportunity to use asset-based lending to raise finance on the strength of their balance sheets and stock - including machinery and plant, stock and commercial property - to finance transactions, provide working capital and fund business restructuring.

Noel Quinn, HSBC’s head of commercial finance for Europe, said: “HSBC’s offering of a full asset-based lending proposition is a natural extension of the extensive lending services already on offer and compliments our successful corporate offering. We are pleased to be able to give our customers access to a full range of options in financing their business.

“HSBC has a strong lending capability and track record of good customer service, which is important to businesses in the current economic climate. This, coupled with our unparalleled international expertise and our strength and success in the UK market, means HSBC’s asset-based lending service can really benefit businesses operating in the UK and those trading internationally.”

A series of new appointments have been made to the asset-based lending team. Graham Moffitt will lead the division as head of asset-based lending and brings with him more
than 20 years of global asset-based lending experience. He was formerly executive director at GE Commercial Finance, working across the UK, Europe and the US. Graham has also worked as managing director of Hilco Receivables Europe and as a senior credit risk manager at Bank of America.

Reporting into Graham are Barry Lee and Bruce Richards, who move across from roles as corporate business development managers at HSBC. Barry has been appointed asset-based lending corporate development manager with responsibility for the North of England and Bruce appointed asset-based lending corporate development manager with responsibility for the South of England.

Barry joined HSBC from a role as regional director for the Midlands at GE Commercial Finance, working there for a decade to provide asset-based financing facilities to businesses in the Midlands. Also joining from GE Commercial Finance, Bruce joins the HSBC team having worked as been a regional manager with responsibility for introducing business in the South of England.

Commenting on the appointments, Noel Quinn said: “These are flagship hires for HSBC and we are delighted to have Graham, Barry and Bruce on board. Having such a strong team in place demonstrates our commitment to offering the best asset-based lending service possible.”

The asset-based lending proposition is part of the newly restructured UK receivables finance business. Under the restructure dedicated teams have also been introduced for corporate and asset-based lending, commercial and smaller businesses led by Kevin Craven, Peter Lowe and Keith Tulley respectively. Steve Box has been appointed managing director of HSBC Invoice Finance (UK), having worked for HSBC for 26 years in managerial and sales roles across corporate and commercial banking.
For more information, businesses can visit www.hsbc.co.uk/invoicefinance

Media enquiries
KATIE DONLAN / ANNA MURRAY
Consolidated
020 7781 2376 / 020 7781 2312
katied@consol.co.uk / annam@consol.co.uk

Responding to the half-point cut to the Bank of England’s base rate, financial solutions company Think Money (www.thinkmoney.com) welcomed its already noticeable impact, and pointed to the implied likelihood of future cuts.

“There’s no question that we’re facing extraordinary issues today, both globally and nationally,” a Think Money spokesperson commented. “As a company, we were pleased to see the Bank of England taking this step – not just dropping the base rate, but dropping it by a substantial amount.

“Furthermore, we’re delighted to see major mortgage providers passing that reduction on to consumers. After so many months of negative news, this could make a big difference to many homeowners’ financial circumstances, as their variable rate mortgages drop from 7% to 6.5%.”

Anyone with a tracker mortgage, meanwhile, is sure to enjoy lower payments at once: The Times predicts immediate benefits for around 4 million people paying home loans that track the Bank’s base rate. ‘Those with a £150,000 mortgage’, it reports, ‘will see their interest-only repayments fall by £63 a month’.

“The same goes for other kinds of credit,” the spokesperson continued, “from secured loans to credit cards: people with tracker deals will certainly profit from the cut, and borrowers with SVR deals will be following their lenders’ reactions closely.”

New fixed-rate loans could also drop in price. “Now that the cost of credit has come down, lenders will be able to pass the savings on, giving their customers a better deal without placing their own profits in jeopardy – something which could have a profound impact on their stability at a time like this.

“Looking beyond the actual cut,” the spokesperson stressed, “it’s equally important to consider the implications – not just what the deal means, but what it says about the Bank of England’s assessment of our economy. First, the cut reveals how seriously it is taking today’s financial troubles. Second, it implies that the Bank is feeling more comfortable about inflation.”

As stated in the Bank’s news release about the rate cut: ‘The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability’.

“In other words, today’s financial crisis has become more of a threat to the nation’s GDP – but on the plus side, slowing growth does tend to slow inflation too. The Bank may well have liked to postpone the base rate cut until inflation came down closer to the 2% target, but given the choice between letting the economy deteriorate and losing some ground in the fight against inflation, it chose the latter.”

As for the months ahead: “The latest BRC-Nielsen Shop Price Index (SPI) for the UK reveals that annual shop price inflation shrank to 3.6% in September, down from 3.8% in August. It’s encouraging to see inflation on the way down, particularly as it gives the MPC more leeway when it comes to future base rate decisions. Various influential bodies are calling for the Bank to make further cuts to the base rate – and there’s reason to hope it’ll be able to do that.”

Barclays is to open a new flagship branch at Piccadilly Circus in London’s West End.

The three-storey building – formerly occupied by Burger King – covers more than 10,000 square feet adjacent to the world famous Piccadilly lights. Work will begin straight away to develop the building into a branch containing the latest designs and technologies, scheduled to open at the end of this year.

Erin Biertzer, Distribution Services Director for Barclays, said: “We are full of pride to be moving into a site as significant as Piccadilly – one of the most iconic locations in the world – and we will do it proud with a branch worthy of the setting.

“Branches are important to us and to the millions of our customers who use them each week. For that reason we are investing to make them more accessible and comfortable and, crucially, making it simpler for customers to do their banking with us in a way that suits them. Barclays at Piccadilly is going to really break the mould and it is very exciting.”

Earlier in 2008 Barclays opened a flagship branch in Manchester and work has already begun on developing 50 further ‘flagship’ branches across the UK as well as refurbishing the entire branch network (currently 1733 branches). The design of these branches has been developed over the last two years at a warehouse in Northampton and has involved extensive staff and customer consultation. New features will include full self-service zones, open counters without glass partitions, new technology to minimise queuing and, at selected branches, longer opening hours including Saturday and Sunday opening.