The results announced last week made for car-crash viewing, as lenders revealed substantial drops in profits. While many of these were largely expected, due to exposure to the US sub-prime market, it was a stark contrast to the rude health of Centrica’s £1bn profits.
Only Banco Santander bucked the trend significantly, with profits €4.73bn for the first six months of 2008 – an increase of 22% on 2007. Abbey’s parent company is currently in talks about the purchase of Alliance & Leicester (A&L), whose fortunes could not have been more markedly different, with profits down a staggering 99% from £290m to only £2m. It has suddenly become a lot more interesting to see what Santander will do with A&L.
While it has been a hairy week for lenders, it has been more mixed for brokers as a number of lenders have reduced rates and loosened criteria. But this cause for optimism was tempered by the long-anticipated Crosby Report, which delivered an interim study of mortgage finance. Industry figures were understandably disappointed, as the report did not make the concrete recommendations many have been calling for. We are going to have wait another three months for firm decisions, which could have serious consequences for the the knock-on effect on an economy that is already slipping into recession.
Sir James made just two concrete conclusions in the report: this situation will continue for a few years yet, and mortgage intermediaries will be cut out of the market as lenders return to distribution through their own branches.
Borrowers need the independent advice given by brokers and will suffer if numbers drop, and the market needs an initiative to restore liquidity. I agree with Association of Mortgage Intermediaries, that the market needs ‘decisive leadership from the Treasury’ now, and cannot wait a further three months. n
