Northern Rock has been accused of abusing its government guarantee to grab savings business from other banks, a practice officials say will be stamped on by authorities in Brussels. The bank, which last month became the first UK mortgage lender to be nationalised in more than 25 years, topped 11 out of 19 categories of savings products earlier this month in a best buy table, a British banker said, with several accounts paying 6.25 per cent, well above the Bank of England base rate. Neelie Kroes, EU competition commissioner, is expected to end that practice as one of her conditions for approving the UK Treasury’s continued £24 billion support operation.
But a solution to the credit crisis and its impact on mortgages appears to be a long way off today as the world’s stock markets plummeted. The Bank of England warned that credit markets continue to deteriorate and that there is a serious danger of further writedowns by the banks, with the difficulty of securitising loans and mortgages posing a particular problem for the property market and the economy as a whole. The Bank moved to pump £5 billion into frozen money markets as London’s leading shares tumbled on the latest impact of the credit crunch. Policymakers made the move to ease overnight lending rates between banks spooked by the bail-out and the cut-price sale of troubled investment bank Bear Stearns. London’s FTSE 100 Index fell more than 2.5 per cent as leading banks such as Halifax Bank of Scotland and Barclays bore the brunt of the sell-off. The £5 billion was only about a fifth of what banks had called for.
A major expansion in occupational health services to keep people in work and off disability benefit is recommended in a report published today. The report, by Dame Carol Black, the National Director for Health and Work, calls for universally available, stronger and more integrated services designed to detect problems early and allow people to continue working. Dame Carol’s report says that services need to be combined with social care and advice about debts and stress, to try to prevent a short-term absence from work turning into a lifetime on benefits.
Where does buy-to-let go from here? asks today’s Guardian. The paper is concerned about investors who bought property to finance retirement and are trapped by negative equity and soaring costs. Just 18 months ago, retired teacher Judith Andrew was convinced by a mortgage broker that a buy-to-let flat would be her ticket to a more comfortable retirement. But now the flat’s value has slumped by a quarter, the rent falls far short of the loan payment, and she faces a 50 per cent mortgage increase later this year. Meanwhile, the UK’s biggest property investment club, Inside Track, last week decided to suspend its buy-to-let ‘Become a property millionaire’ seminars, and one of the biggest lenders in the market, Paragon, is axing 93 jobs.