Following the move from the Bank of England to try to inject life into a dying housing market, many experts are wondering just how much effect their announcement and actions will have. Bad credit mortgages are continuing to go into default and plunging property values are making the situation even worse. Although banks were generally happy with the announcement, most acknowledge that more needs to be done to help consumers who are in danger of defaulting on their bad credit mortgages. Banks are now withdrawing these deals, but that won’t help those who are already facing foreclosure. In fact, the availability of refinancing is in short supply, which is compounding the problem for many home owners. The biggest fear is that the BoE didn’t make a big enough move in time to stop more bad news from coming down the pike.
James Hamilton with Numis Securities states, “We are clearly past the peak of banks’ profits. I do not expect to see [them] reporting losses so there is no risk of insolvency. But there are clearly liquidity risks out there - particularly for Alliance & Leicester and Bradford & Bingley, which are at number one and two in the risk list.”
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