| Not only Northern Rock sold off its mortgages to | | | | problems to those that caused the US mortgage |
| international financiers as securities backed by assets, | | | | meltdown. Namely, that the British housing market way |
| but nearly all UK banks have used the global | | | | overpriced and can only go down in the immediate |
| marketplace to locate cheap funding. Approximately | | | | future. |
| 25% of all UK mortgages were financed with the sale | | | | These investors believe that there may be a downturn |
| of mortgage backed bonds. | | | | in the housing market in Britain of as much as 10% |
| Approximately £200 billion worth of UK | | | | over the next 12 months. If these investors do not |
| mortgaged-backed bonds are currently trading. It is | | | | come back to the UK it could cause serious problems |
| fairly likely that your mortgage is actually owned by an | | | | for regular British borrowers in finding loan at a decent |
| American pension fund or an Australian hedge fund. | | | | interest rate. Recent indications from the Chancellor of |
| While you were under the impression that you had a | | | | the Exchequer, Alistair Darling, that a new kite mark, |
| mortgage from your local building society. | | | | dedication for mortgage lenders will come into place. |
| Last summer saw the end of asset-backed securities, | | | | This should help to bolster the wholesale purchase of |
| causing problems for many mortgage lenders, not just | | | | mortgage assets, giving British lenders the much |
| the well-publicised Northern Rock situation. These | | | | needed cash to fund new loans. |
| securities were the source of funds for millions of | | | | Once in place, this new system would allow European |
| cheap loans of all kinds, not just mortgages. The | | | | investment houses to purchase 'job lots' of mortgages |
| inevitable result is an increase in mortgage rates and | | | | from high Street, building societies and banks in the UK. |
| the scarcity of new mortgage funds. | | | | This boost would not only be financial. It would also be |
| This shortage has taken the wind out of the sails of a | | | | a psychological boost for the housing market that may |
| housing market. Basic mortgage backed bonds have | | | | well stabilise it, and possibly bring about healthy |
| led to a few problems; the real trouble has come from | | | | upswing in new mortgages and house purchase. |
| other collateralised debt problems related to the US | | | | Is essential the government's plans to keep the |
| sub-prime mortgage meltdown. These funds have | | | | mortgage market buoyant, it has been well publicised |
| caused a ripple effect of serious problems throughout | | | | over the last year that there is a massive shortfall in |
| the regular mortgage backed bonds, market. Firstly, | | | | the number of houses available, especially for first-time |
| there has been depreciation in the reputation of all | | | | buyers. Therefore, the government is very keen to |
| securities that are backed by mortgaged properties. | | | | keep the money flowing keep the new housing |
| In addition, these collateralised debt organisations with | | | | estates, blossoming across the country. There is a |
| the main buyers of British mortgage-backed securities. | | | | feeling in the mortgage world of white at the end of |
| However, they are no longer in the market for this kind | | | | the tunnel getting closer, and after budget may soon |
| of wholesale debt purchase. International investors | | | | kick start a new house buying boom. |
| view the British housing market as having some similar | | | | |