March 10 (Bloomberg) — Northern Rock Plc, nationalized by the U.K. government last month, will stop selling subprime mortgages in Britain.

The bank will stop selling the loans today, though applications submitted before will be processed, the Newcastle, England-based lender said in a statement today.

Northern Rock, bailed out by the Bank of England after it ran out of funds for new loans in September, began selling subprime and “near prime” home loans last year on behalf of Southern Pacific Mortgage Ltd., which was responsible for funding the loans and managing the repayments, it said.

Bloomberg.com: U.K. & Ireland
Northern Rock Pulls Out of Subprime Mortgage Market in U.K.

Credit crunch rebuke for FSA and Bank of England – Times Online

Britain’s financial regulator and its central bank must develop a better plan for warning banks and investors of high risks, after overseeing the loss of billions of pounds in the global credit crisis, a damning report by MPs will recommend today.

In its second report on last year’s liquidity crunch, the Commons Treasury Select Committee criticises the Financial Services Authority (FSA) and the Bank of England for failing to ensure that financial companies were prepared for the worldwide closure of credit markets. The Government must respond to the charges within two months.

Although the FSA and the Bank gave warning many times that banks were lending too much too easily, they failed to follow up their words with action, the cross-party committee says. John McFall, the chairman, says: “It is clear that many market participants failed to heed warnings about a serious underpricing of risk and the potential for impaired liquidity in financial markets in the mistaken belief that the good times would go on and on.”

The committee will recommend that in future the regulator and the bank should write a letter to financial companies highlighting two or three key risks. The MPs believe that the two institutions should then seek confirmation that the companies have considered the risks and publish a commentary on the responses.

Banks and investors, such as pension and hedge funds, wrote down billions of dollars last year after the value of their investments in asset-backed securities plunged because of a wave of defaults on the underlying American sub-prime mortgages. The banks, investors and credit-ratings agencies that rated the securities also face heavy criticism by the MPs.
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The endowment mortgage is a financial tool that comprises of the interest on the loan as well as investment in bulls and bears. The customer pays only the interest. The balance goes into an endowment fund connected to the stock market. This worked well during the time of the stock boom during the 1980’s and 1990’s. It was anticipated that gains in the stock market would pay off the loan amount – the capital. But today the stock market is fluctuating and the endowment does not seem to be all that profitable. Considering the trend of the market it is wise to get out of it and opt for repayment mortgage.

Those that understand the financial market strongly advise that the endowment mortgage should be replaced with repayment mortgage. Otherwise the risk is there that at end of the tenure the individual will be saddled with huge debts. The two main shortfalls of endowment mortgage suffers from are – shortfall and wrong selling. Generally the public is not aware that the endowment mortgage might not prove to be profitable – fail to reach the expected goal. Thus anybody who has been sold the endowment mortgage without being made aware of the risk involved in the present day market of bulls and bears has been wrongly sold the financial tool.

Mortgage is a type of secured loan given against the pledging of the property as collateral. In a re-payment mortgage no matter what the weather is in the stock market, there is no fear of losing the valuable asset, provided of course one is current in payment. The monthly amount covers both the loan amount as well as the interest.

On the other hand endowment mortgage often fails to gain points and will prove to more expensive in the long run. If one stops paying the premium of endowment mortgage during the initial years the cash-in-value of endowment being very low it will tantamount to losing all that has been paid if one decides to sell at this juncture. Thus endowment mortgages are not flexible. But with re-payment mortgage the question of deficit does not arise.

Endowment mortgages like other mortgages run into 20 to 25 years. During all that time it is not possible to keep detailed track of the waves in the stock market. With endowment mortgages there is a constant fear factor attached. While with re-payment mortgage one has a peace of mind. Apply here for getting a quote…