26 | FUNDING ANALYSIS WORDS |OMF & Moneycorp
BUSINESS
www.opp.org.uk | FEBRUARY 2012
Finance data analysis
In OPP’s regular monthly look at what is happening in the international mortgage, lending and fi nance markets, our expert partners Moneycorp and Overseas Mortgage Finder discuss the news that a series of new and positive steps have been taken by the European Central Bank at last, and that the number of overseas property buyers enquiring about mortgages to buy in London is rising steeply as the Olympics get closer.
January highlights
• New positive steps taken by the European Central Bank • Foreign property buyers start to ask for more and more London mortgages
As we predicted in our OPP mortgage data analysis column last month, the European Central Bank (ECB) has fi nally taken some decisive action and injected much-needed liquidity into the European fi nancial system. Through a new and innovative
three-year loan scheme put forward by the ECB, Eurozone banks have now managed to borrow additional monies believed to be in the region of €489 billion.
Over 500 banks managed to take advantage of this offer and get hold of a fresh injection of cash, meaning that many banks around Europe should now be able to safeguard their fi nancial
position by increasing their capital ratios. They also ought to start lending money more freely once again. One of the biggest problems that European banks have faced during this debt crisis is that so much of their money has been tied up by lending to their national governments through sovereign bonds. This action has had a direct impact on the amount of money that banks have been able to lend out through loans and mortgages to the overseas property industry, and has particularly affected banks who hold a large amount of sovereign bonds in countries like Greece, Ireland and Portugal. Over recent months there
Top 10 Countries By Enquiries Country & Position
1 Spain 2 USA
3 France 4 Ireland
5 Portugal
6 Caribbean 7 Cyprus 8 Turkey 9 Italy
10 Bulgaria Mortgage Enquiries
13.04% 12.17% 8.69% 6.95% 6.09% 5.22% 4.35% 3.48% 3.04% 2.61%
Monthly chart change
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3 4 8
has also been an escalating risk that these fringe Eurozone countries may default on their loan repayments to the banks due to their mounting levels of sovereign debt.
As a result, banks that owed a large amount of sovereign bonds have been penalised when trying to borrow new fi nance from the money markets. They have had to pay a premium to borrow
“Too much EU bank money has been tied up by lending to their national governments via sovereign bonds”
new funds after being classed as a higher lending risk. However, thanks to the recent action taken by the ECB, these same banks have now been able to borrow the money they required at a very competitive rate of interest. Back on December the 8th, the ECB dropped
its interest rate from 1.25% to 1%, which meant that banks that took up the loan option put forward by the ECB managed to borrow at this extremely low rate of interest.
From a mortgage perspective, the action taken by the ECB is very welcome news as there has been clear signs that some mortgage providers were starting to feel the pinch. Lenders in France, Italy and Portugal all raised their interest rates by more than 1% within the same one-month period. Our hope is that mortgage lenders will now hold off making any further interest rate rises ... and perhaps even drop them back down, but we will have to see what the banks do with the money over the next few months, especially in light that many of them have once again been encouraged by the European Commission to use the money to buy even more Sovereign Bonds. Over the past few months we have received a marked increase in mortgage
Top 10 Countries By Lowest Interest Rate Country & Position
1 Hong Kong 2 Australia - Singapore - Canada - France
3 United Kingdom 4 Spain 5 Malta 6 USA 7 Italy
Initial Interest Rate
1.85% 2.09% 2.09% 2.09% 2.09% 3.19% 3.25% 3.28% 3.69% 3.70%
Monthly chart change
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