FRESH MORTGAGES SUSPENDS LENDING - A new Irish mortgage operator which started taking on customers in recent weeks has suspended lending. Fresh Mortgages has been targeting selling home loans to the self-employed. It backer Credit Suisse sought to put up interest rates to Fresh.
Its founder David Ryan says that Fresh's funding partner has decided to exit the Irish market. 'This is extremely unfortunate from our point of view, because we have had to suspend lending just weeks after we just begun,' he explains.
He says that the terms under which Fresh would have had to lend to people would have been exorbitant and 'morally wrong'. 'We were simply not prepared to do that,' he added.
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MARKETS RATTLED BY MORE BAD BANKING NEWS - Shares in Ireland ended down significantly again yesterday with the Irish market off almost 3%. In the US, the Dow Jones was down 1.6%. Citibank group is now expected to lose a massive $15 billion as a result of the sub-prime crisis. Asian markets also fell this morning. The brokers are now calling this 'Black November'.
Pat McArdle, chief economist with Ulster Bank, says the Citibank news yesterday that its sub-prime losses may be even higher than first feared rattled the markets. The news that the bids for Britain's troubled Northern Rock bank were lower than expected also affected market sentiment. Fears that the US economy is heading into more turbulent times also affected investors worldwide. The number of economists now predicting a US recession has doubled in recent times, Mr McArdle says.
Despite Northern Rock's current woes, the economist says there is no danger of the bank going under. He says the British Government did warn bidders yesterday that its guarantee might not last much longer, but believes the Government will ultimately bail small investors out.
On a possible US recession, Mr McArdle says the current US housing woes seems to be spreading to the general economy in terms of consumer spending. However, he adds that the US Federal Reserve has hinted that if things do not improve, they will cut US interest rates again.
Mr McArdle says that if the US Fed cuts rates again, global interest rates will experience downward pressures. The Bank of England recently said that its rates will probably fall next year, but the European Central Bank are much more hawkish and have actually talked about increasing rates. He says that what is most likely to happen is for the ECB to keep rates steady, with economic pressures eventually leading to a reduction in rates late next year.
MORNING BRIEFS - Northern Rock says bids received so far from potential investors are 'materially below' its share price. That sent its shares falling by 21%. Two suitors, Virgin Group and Olivant Advisers, have both submitted their proposals to rescue the firm.
*** Finance Minister Brian Cowen has indicated he will plough ahead with increased spending on infrastructure in the Budget despite slowing tax revenue. Capital spending will increase by 12.5%. But demands for cuts in stamp duty from the auctioneers and construction industry do not seem likely to succeed.
*** Hewlett Packard, which is a major employer in Ireland, announced good results last night. Group operating profit was up 38% to $2.6 billion. 'Strong performance across our businesses was highlighted by sharp improvement in our software segment,' said Mark Hurd, HP chairman and chief executive officer.
*** The euro is worth $1.46 and 71 pence sterling this morning.
