Previously the UK's largest mortgage lender, HBOS has taken quite a blow at the hands of the credit crisis. The latest bad news reveals that HBOS's mortgage arm, The Mortgage Business (TMB) has stopped accepting new business.
The blow comes in the wake of what seems to be never ending trouble for the HBOS Group. It began earlier this year when the bank was forced to launch a £4billion rights issue as its balance sheet needed a boost due to losses from sub-prime mortgage
Since then, the rights issue has been shunned by HBOS's investors and its underwriters have been left picking up the pieces. In addition, in its interim results, HBOS revealed a 51 per cent slump in pre-tax profits for the first half of the year.
If that is not enough, according to today's reports, the online arm of HBOS, Intelligent Finance (IF), will stop offering current accounts
, credit cards
, personal loans and some mortgage deals as of next month.
It is thought that the banking group will consequently be cutting more than 400 jobs. TMB assured customers that those with an existing TMB mortgage will not be affected by the shake up that takes affect from August 22. However, it is believed that many will be transferred to Birmingham Midshires, which is also owned by HBOS.
The moves come amid a credit crunch that, according to Governor of the Bank of England looks set to drag the UK into a recession as the economy starts to shrink. In the past the UK has been able to rely on strong employment to bolster the economy but jobs are going, as seen with HBOS's 400 potential job losses. In fact, unemployment is currently rising at its fastest rate since the UK's last recession.
Speaking yesterday on the rise of inflation to 4.4 per cent (more than double the target rate), Mr King said: "It may still – just – be summer, but there is a feeling of chill in the economic air. The British economy is going through a difficult and painful adjustment – to higher energy and commodity prices, and in banking, credit and housing markets. This adjustment to our economy cannot be avoided. And, as a result, inflation is rising and growth is slowing."
© Fair Investment