Although the UK sub prime mortgage market is relatively smaller than the US. The UK sub prime sector is also less likely to have major defaults because generally UK lending stuck to stricter criteria than in America. However, the main concern at the moment is that the US Sub prime woes are increasingly affecting the UK banking and mortgage industry through the shortage of capital and lending facilities.
Due to a shortage of capital on financial markets, there are concerns that other lenders such as Alliance & Leicester, and Bradford & Bingley may face the prospect of a similar shortgage of funds. Today, shares in these 2 companies dropped sharply as investors become nervous about their respective exposure to US sub prime markets Times article
The Bank’s issued statements saying they could see no reason for the fall in share prices, although investors are wanting them to explain how much exposure they have to the sub prime sector.
Northern Rock shareholders look to be the biggest losers from the Bank’s recent demise. None of the rescue packages are willing to value the company close to its existing value.
Buy To Let Mortgage provider, Paragon issued a statement saying they could face severe financial difficulties as a result of the credit crunch. Paragon are Britain’s 3rd biggest mortgage provider for the buy to let market. Its shares have fallen over 70% in the past 2 months. Reuters article
