Uk Mortgages Harder and Harder to find…..

A year ago, when house prices were booming and money was freely available in the capital markets, banks were falling over themselves to lend to customers.

Not any more. Since the credit squeeze began nine months ago, the number of mortgages on offer to consumers has dropped dramatically as banks have struggled to access wholesale funding.

And the problem seems to be getting worse. In the past week, Britain’s biggest lenders have started to apply more stringent criteria to mortgage approvals, rejecting riskier borrowers and turning away those with a blemished credit record. Some competitive products have been withdrawn to avoid being flooded by new applications.

The action of the banks has partly been triggered by worsening conditions in the money markets, where funding has become more expensive and where the London Interbank Offered Rate (Libor) – the rate at which banks borrow in the market – recently hit 6 per cent.

All banks and building societies rely to some degree on wholesale funding to finance new home loans and they have been passing on the more expensive funding to their customers.

The funding pressures also mean that some lenders have withdrawn from the market altogether, and mortgage brokers estimate that £50bn ($100bn) of capacity has been taken out from what was a £360bn UK mortgage market.

Ray Boulger, technical director of Charcol, the mortgage broker, said: “There is still demand from borrowers even though housing transactions are expected to be reduced this year. However, the supply of mortgages has become scarcer.”

The squeeze comes at a time when an estimated 2.75m people are due to remortgage in the next year. HBOS, the UK’s biggest mortgage lender, has forecast that the average borrower taking out a new deal will pay £96 a month more.

The woes of newly nationalised Northern Rock are compounding the situation. The Newcastle bank took one in five of all UK mortgages in the first half of 2007. Now it is encouraging 60 per cent of borrowers whose mortgage is up for renewal this year to leave.

Another consequence is that banks have been swamped by new applications from people wishing to remortgage. To ensure they are not overwhelmed, some banks have increased their prices.

Nationwide, the UK’s second largest mortgage lender, and Cheltenham & Gloucester, part of Lloyds TSB, have increased interest rates on some tracker mortgages.

This week First Direct, part of HSBC, was forced to close to further customers until it clears the backlog of new applications. The Co-operative Bank has withdrawn its two-year mortgage range after seeing huge demand.

Unemployment rises for third consecutive month in US….

The New York Times presents startling data on employment in the US, detailing how the economy shed 80,000 jobs in March, the third consecutive month of rising unemployment, presenting a stark sign that the country may already be in a recession.

Sharp downturns in the manufacturing and construction sectors led the decline, the biggest in five years. The Labor Department also said employers cut far more jobs in January and February than originally estimated.

Read the full report here…. http://www.nytimes.com/2008/04/04/business/04cnd-econ.html?ex=1365048000&en=a7dd91c960a9aded&ei=5088&partner=rssnyt&emc=rss