December 2007 – TML Administration

The Mortgage Lender TML confirmed yesterday that it has gone into administration as a direct result of the ‘liquidity crisis’. Some fear this is to be the result of private equity investors withdrawing as result of the current credit crunch. Andrew Duncan and Andrew Stoneman, partners from Menzies Corporate Restructuring, have been appointed as adminstrators to TML Financial Solutions Limited, which trades as The Mortgage Lender (TML)

The Hampshire based brokerage launched in 2000 was originally part of Kensington mortgages specialising in the sub prime and specialist market.

The firm insists it was trading profitably until the end of September, then the recent liquidity crisis meant it was difficult to source products for its clients as lenders like Kensington, Beacon and GE Money pulled out of sub-prime market.

The company will continue to trade as normal while a full analysis of the business is performed. The general feeling is that the company has a great chance of trading out of administration. It is believed that the business may be attractive to either a lender, a broker or a debt management business.

The Mortgage Lender enjoys high brand recognition and has helped a great many people obtain personal finance, therefore the brand equity remains strong. It also boasts a highly skilled and experienced workforce, loyal customer base and up to the minute technology to support its business. We believe this makes it an attractive business for any potential buyer or investor already operating within, or keen to enter, this niche market.

This comes as a shot acorss the bows for other mortgage / loan companies in the sub-prime market.

Blow for homeowners as rate cuts are abolished – May 2008

Further rate cuts for home-owners appear unlikely for 2008 as those in charge struggle to control runaway inflation. (The Bank of England signalled this on the 14th of May 2008).

The Bank’s latest quarterly inflation report suggests the Consumer Prices Index (CPI) will remain well above its 2% target in two years time, if interest rates are cut now.

But in contrast other analysts had predicted rates would be cut by 0.5% to 4.5% but with inflation hitting a six-year high at 3 per cent that no longer seems possible.

The warning comes in a gloomy set of forecasts which predicts the CPI could spike as high as 3.7% this year and remain above 3% until well into 2009. With inflation under pressure from surging oil, food and household energy bills – as well as a weaker pound across Europe – growth is expected to fall as low as 1% for 2008.

This fall is well below official Treasury predictions and comes as the credit crunch bears down on lending, house prices and consumer spending, slowing the economy to a crippling degree, many feel this is just the start.

Governor of the Bank of England Mervyn King said its Monetary Policy Committee faced an even more challenging balancing act between controlling inflation and preventing an economic slowdown. He equally warned of a difficult period ahead for households as inflation rises.

“As price increases feed through to household bills, they will lead to a squeeze on real take-home pay, which will slow consumer spending and output growth, perhaps sharply.”

Mr King added:

“The credit cycle has turned. Commodity prices are rising. We are travelling along a bumpy road as the economy rebalances.”

Inflation will return to the target and growth will eventually recover to a sustainable rate. But we will need to be patient.

“These forecasts, which said there was a risk that the UK’s economic slowdown “could be more prolonged”, is the latest in a succession of miserable economic data this week.

On Monday official figures showed factory gate prices rising at a record rate during April and property prices dropping by up to ten per cent.

Credit Crunch on Middle Class Home-owners – May 08

Ever increasing numbers of middle-class home-owners are being pushed into crippling debt and despair as a direct effect of the credit crunch.

White collar workers, rather than benefit claimants and poorer members of society, are the ones now begging for help, according to UK debt charities.

Affluent areas like Tunbridge Wells in Kent, Haywards Heath in West Sussex and Congleton in Cheshire are among those feeling the ever increasing pinch.

Jamie Elliott, co-ordinator of financial advice charity Transact, said: “Our services, with the credit crunch, are being overwhelmed by a whole new breed of debtor: middle-class people”.

The latest figures show the number of people seeking help from just one charity, Community Money Advice, has leapt by ~85 per cent.

CMA senior debt adviser Emma Russell said: “I’ve had at least two clients sit in front of me and tell me they would have killed themselves if they hadn’t found out we were here”.

One quick note – please don’t consider suicide, it is meaningless and feeble way of dealing with the problem – People are there to help. One company that we can reccommend is PayPlan.

The figures come off the back of more gloomy property market news – house sales could fall at least 40 per cent this year and the number of mortgages available has more than halved.

Manipulation of Interest Rates

Banks and Building societies are apparently taking a leaf out of the ever successful supermarkets, in an attempt to maximise their profit margins in this competitive mortgage market; by adding 0.99% to their mortgage rates.

If you investigate the market place you will discover that the minority of lenders will offer interest rates that are considered a whole figure i.e., 7.00% as opposed to the majority who feel a figure such as 6.99% is sub-consciously far more appealing.

One can equally produce a model to demonstrate which digits maximise profits for banks, when customers round and prune interest rates. The model would demonstrate that lenders maximise their mortgage profits by applying an interest rate that is just below a whole number. For example 3.99% as opposed to 4.00% or 5.95% as opposed to 6.00%.

These shrewd business men know how to appeal to the masses and is the exact same policy that the major supermarkets employ when they offer a product at £9.95 instead of £10.00. The trick is that the majority of people round the figure down and convince themselves that they are getting an amazing deal.

Therefore there can’t be a better argument than: Shop around and locate the best mortgage deal for your needs by investigating as many of the mortgage products as possible.

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