Bradford & Bingley's mortgage product launched yesterday has drawn criticism from mortgage sector analysts and MPs for possibly plunging borrowers into negative equity at a time when house prices are predicted to do nothing or even fall through the next year.
The Times writes that the offer of loans up to 130% of the value of borrowers’ homes is seen as going against the trend, and comes even after the Bank of England warned of the UK’s £1trn household debt load.
“I would like to see the committee investigate such high-value loans before they become a trend,” the paper quotes Treasury Select Committee member Nigel Beard.
Adds Ciaran Barr, chief UK economist at Deutsche Bank: “House prices are expensive and they are unlikely to continue rising in years to come. Borrowers should definitely not be taking out any mortgage which is bigger than the value of their home. The risk is substantial and doesn’t make any sense.”
The Times writes several lenders currently allow homeowners to borrow more than the value of their homes, but B&B’s Mortgage Express business is the only one to secure such loans solely on the value of the property.
A FIRST TORY budget if elected this year would result in some £4bn in tax cuts and £8bn in reduced public borrowing, the FT reports.
The tax cuts would be funded by lowering spending by £12bn in the 2007-8 fiscal year, according to the plans outlined by Opposition leader Michael Howard and his shadow chancellor Oliver Letwin.
”A pledge to reduce borrowing puts the Tories in a strong position to press home the claim that a vote for Labour is a vote for tax rises,” the FT states.
THE TAKEOVER BATTLE for the London Stock Exchange moved up a gear with the approval by Deutshe Borse’s supervisory board yesterday for executives to up the cash element of the bid already tabled through discussions, plus any other measures necessary to secure the deal, The Daily Telegraph says.
One fly remains in DB’s ointment in the form of shareholder TCI, which, the stock exchange operator admits has enough shareholder votes to force an emergency general meeting to discuss dismissing the supervisory board as part of a plan to abandon the takeover deal in favour of a share buyback.
”The supervisory board's statement, issued last night, will be a significant boost to chief executive Werner Seifert, who has had to deal with a number of damaging stories about the takeover proposal coming from Frankfurt. The stories have been denied but have led to speculation that some members of the board are opposed to his proposals,” the Telegraph writes.
ON THE ISSUE OF TAKEOVERS, The Times reports a “wave of money” worth more than the GDP of the Netherlands has been raised to fund private equity deals worldwide, which threatens to end in tears as asset prices are bid up too high.
An estimated $518bn has been raised so far to fund deals, with an estimated 508 private equity funds looking to add even more to the global pot.
Suggested targets include ITV with a £6bn price tag, The Times writes.IFAonline
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