Bank of Ireland and ICS Building Society are to cut their fixed interest rate mortgages from the start of business tomorrow. The cuts apply to new and existing customers. Jonathan Byrne of Bank of Ireland said the reductions were a result of the bank’s monitoring of the cost of funds on the international money markets. Interest rates on these markets moved sharply higher as a result of the credit crunch but have come back in recent weeks.

New figures from the British Bankers’ Association show that mortgage borrowing in the UK is growing again, but remains at a far lower level than the same time last year.The spring upturn in the home finance market saw 191,857 mortgages approved in April, a two per cent increase in borrowing on March but 17 per cent lower than the same month last year.

The BBA also revealed that the average amount borrowed was £122,700.The number of loans for property purchases increased to a nine-month high, but was still down on last year’s figure.”Whilst growth in net mortgage lending continued to be relatively weak in April, there are signs that the falling trend may be stabilizing,” said Daivd Dooks, BBA director of statistics. “Approvals, particularly for house purchase, are responding to the usual spring stimulus and, although not near the levels of last year, they indicate sufficient activity to support mortgage lending in the near-term,” he added.

The weak housing market didn’t hurt earnings last year at a local bank aimed at providing capital for home loans. The home loans‘ 2007 earnings rose 6 percent to $269 million. But fourth-quarter profits dipped 4 percent to $66 million. The bank, owned by 725 member institution shareholders in Ohio, Kentucky and Tennessee, makes capital available to banks so they can then lend money for housing and economic development.

Disruptions in the credit and mortgage markets fuelled growth in the bank’s key business lines - credit services and mortgage purchasing - as member banks sought increased liquidity. Balances in those areas rose 21 percent to $68.8 billion. And the principal balance on its advances jumped 26 percent to $53 billion. The FHL Bank’s assets climbed 8 percent to $87.5 billion. Its return on equity for the year rose 0.17 percentage points to 6.87 percent.

Home loan and consumer durables loan borrowers could look forward to softer interest rates. Following the reduction in the cost of funds, banks are reviewing the interest rate structure, according to the Indian Banks’ Association (IBA). Speaking to the media after the managing committee meeting on Friday, IBA CEO H N Sinor said, “Banks have seen an improvement in their spreads during the financial year.

This is because the incremental credit-deposit ratio this year has fallen to 49% from 130%, seen a year ago. Banks which were forced to raise a large chunk of funds a year ago through bulk deposits are able to renew liabilities at a lesser rate, with a clear differential of 200 basis points.” Mr Sinor pointed out this will clearly give banks the leeway to make fresh lending at lower rates. This follows a statement from the Union finance minister a few days ago, expressing concern on the slowdown in the growth in consumer durables and mortgage loans. The IBA managing committee meeting was attended by the heads of 18 banks, of the total 31 member banks.

A massive fall in consumer confidence has led many to predict a fall in interest rates will occur in the next six months. Nationwide and Lloyds TSB today released reports showing heavy falls in consumer confidence.”There’s been a noticeable change of sentiment on the economy this month and people now seem to feel much more uncertain about the future,” said Nationwide’s executive director Stuart Bernau.”With property prices cooling, consumers seem to be feeling less optimistic, tightening their belts and looking to reduce their debts rather than spend on the high street.

People seem particularly uncertain about the future of the economy, jobs and income and it could be that the next couple of months are critical to the future direction of the economy,” he explained. And this drop in confidence - along with other economic data - is leading people to predict interest rates could soon be dropping from their three-and-a-half year high of 4.75 per cent leading to cheaper mortgage loans for home owners.

Trevor Williams, chief economist at Lloyds TSB Financial Markets, commented: “As a result of continued uncertainty about economic conditions, as suggested by this [consumer confidence] survey, it is not surprising that financial markets are currently pricing-in a cut in interest rates before the end of the year. ”The outlook for consumer spending growth remains one of the key uncertainties facing the Bank of England as it aims to meet its two per cent inflation target.”

The Delhi High Court has issued notice to a home loan borrower who had taken a bank loan for purchase of a property from the Delhi Development Authority but had later sold the same. The Court has asked him to explain why he should not be sent to jail for execution of a decree on attachment of his property as he had defaulted on payment of the loan amount. Directing the debtor to file a reply to the notice by March 28, Justice S. N. Dhingra asked the creditor, Punjab National Bank, to deposit subsistence allowance for the debtor’s civil imprisonment for a period of two weeks.

The Court passed the order on an application by a person who had purchased the property in question from another person to whom the debtor had sold it. The bank had opposed the application arguing that the applicant was not a party to the suit on which a civil court here had passed the decree. It submitted that actually the property in question belonged to the debtor. Counsel for Punjab National Bank submitted that the facts of the case were that the debtor had taken a loan from the bank to buy a property from the Delhi Development Authority (DDA). Since DDA did not execute any conveyance deed in favor of the debtor and sent it to the bank, the property still stands in the name of the debtor in its records, the counsel submitted.

Home loan interest rates are expected to fall in the weeks leading to the budget. After the HDFC reduced its interest rate by 25 basis points, ICICI Bank and other public sector banks are also thinking of reducing their interest rates by 25 to 50 basis points. Sources in ICICI Bank said the rate cut announcement is expected in a couple of weeks. “We are evaluating the interest rate scenario and likely to take a final decision shortly,” a source in the bank said. “Given the global trend, there is case of softening of the interest rate. However, much depends upon the inflation, which is still at around 4 per cent with upward bias.”

However, bankers are skeptical that the reduction in the interest rate may increase the home loan demand. Since January 2006, the interest rate has been increased by 4 per cent and the equated monthly installment (EMI) has increased by Rs 250 per lakh for 20-year loan. A reduction of 50 basis points would effectively reduce the EMI by around Rs 34 for a 20-year loan. Bankers said the current decline in the home loan disbursement is primarily because of the sharp rise in real estate prices, as many borrowers are finding it difficult to fork out such huge EMIs. Union Bank of India Chairman MV Nair said there is a case for deposit rates and lending rates to come down. The Bank of Maharashtra is planning to reduce lending rates in some segments next week. “We might effect an interest rate cut in the range of 0.25-0.50 percent,” said bank chairman MD Mallya.

Housing finance company HDFC said on Thursday that it has reduced its retail prime lending rate (RPLR) by 25 basis points, with effect from February 1.The reduction in rates will benefit all the existing borrowers. The HDFC’s current RPLR is 14 per cent, which would now come down to 13.75 per cent. For the new home loan customers, HDFC’s rate of interest under the Adjustable Rate Home Loan continues to be at 10.25 per cent, said a press release. “The advantage of a cut in RPLR will accrue to all the existing floating rate customers over the period of next three months based on their respective reset dates,” the release said. About eight lakh borrowers will benefit from the rate cut, said an HFDC source. State Bank of India currently charges between 10-11.5 per cent for loans up to Rs 20 lakh. An SBI official said that no decision has been taken about reducing the rates yet. A spokesperson for ICICI Bank said the bank would decide based on its cost of funds.

The FBI on Tuesday said it is investigating 14 companies for possible accounting fraud, insider trading or other violations in connection with home loans made to risky borrowers. Agency officials did not identify the companies under investigation but said the wide-ranging probe, which began in spring 2007, involves companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. The Federal Bureau of Investigation is working in conjunction with the Securities and Exchange Commission on the corporate-fraud probe, said Neil Power, chief of the FBI’s economic crimes unit in Washington. As the nation’s housing crisis worsens, there has been a dramatic spike in the number of mortgage fraud cases under investigation.

An agency spokesman said 1,210 such cases are open, up from roughly 800 a year ago. The announcement comes weeks after authorities in New York and Connecticut said they are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities sold to investors. Power said the FBI is looking into the practices of so-called subprime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors. Referring to certain unnamed bankrupt subprime lenders, Power said there are “some irregularities there that we’re looking into,” including the timing of stock sales by executives.

Dozens of subprime lenders have filed for bankruptcy in the past year, most prominently New Century Financial Corp. “We’re looking at the executives to see if they were committing insider trading,” Power said. Power also said law enforcement officials are looking at whether homebuilders manipulated financial statements to inflate revenues. An SEC spokesman declined to comment. The agency has said about three dozen investigations related to the mortgage market meltdown are ongoing. Defaults on subprime loans have risen over the past 12 months and are primarily responsible for the credit crunch that has disrupted global financial markets. Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings Tuesday that they are cooperating with requests for information from various, but unspecified, regulatory and government agencies. Officials at the companies either declined to comment, or could not immediately be reached.

Siam Commercial Bank expects loan growth this year of between 12 percent and 15 percent, well above the industry average of 4.5 percent to 5 percent. SCB, the country’s third largest bank in terms of assets, posted loan growth of 16 percent last year, with net profit jumping 31 percent to 17.35 billion baht.”We see the economy growing 4.5 percent to 5 percent this year, compared with 4.6 percent in 2007. The major factors are improved consumer confidence, greater government spending and the infrastructure megaprojects,” President Kannikar Chalitaporn said yesterday.”But key risks include economic stability, as well as external factors such as the sub-prime mortgage crisis, oil prices and international politics.”Most analysts project 2008 to be a strong year for local banks thanks to lower provisioning burdens and expectations of stronger loan growth. Loan growth for the sector is projected at 4.5 percent to 5 percent, up from 4.5 percent last year.

But Mrs Kannikar said local banks would face greater pressure from Thai-foreign banks in both products and services.”It will be a year where we will return to focus on corporate lending again, with a net loan growth target of 12 percent, compared with 10 percent last year,” she said. The bank’s small- and medium-sized enterprise segment is projected to grow 20 percent this year, with new loans of 40 billion baht from an outstanding loan base of 212 billion at the end of 2007. Growth is expected to slow from the torrid 39 percent posted last year.