Weak UK Insurance Stocks; Builders Write Down

123jump.com Staff
24 Feb, 2009
New York City

UK stock edged lower after mortgage lending hovered at half the level a year ago, home builders are expected to take another write-off in land values and insurance stocks are the latest target of short sellers. The net mortgage lending rose in January but dropped 43% form a year ago.

[R]1:00PM New York, 6:00PM London- U.K. mortgage lending increased by £2.9 billion in January.[/R]

U.K. stocks fell marginally on reports that the country’s mortgage lending is still 43% lower than a year ago. Analysts also forecast that homebuilders will announce a further £1.63 billion in write-downs on land holdings this year.

In European trading banks and insurance companies traded lower. Dutch insurance giants Aegon NV and ING declined 12% and UK based Aviva and Prudential traded lower after hedge funds target the sector for short selling.

Market Sentiment

In London trading FTSE 100 index fell 0.9% or 34.29 to 3,816.44.

Of the FTSE 100 index stocks, 29 increased, and 73 declined. Thomson Reuters led advancers in the index shares with a rise of 6.6%.

U.K. Mortgage Lending Increase by £2.9 billion in January

British Bankers Association reported today that net mortgage lending increased by £2.9 billion in January and overall company finance increased by £14.1 billion.

Personal deposits declined by £2.3 billion as spending drained cash and savers sought alternative deposit products.

The number of mortgages approved for house purchases increased to 23,376 in the review period from 22,416 the previous month. However lending levels were 43% lower than the comparable year ago period.

Net mortgage lending, which excludes redemptions and repayments dropped £2.9 billion, falling the most since April 2001, while the value of total mortgage advances were £9.9 billion.

According to the report, the number of people remortgaging rose to 30,710 loans from 30,500 in December but 60% lower than 12 months earlier.

Demand for unsecured credit was depressed in January with consumers spending £6.1 billion on their credit cards.

Borrowing through overdrafts and loans declined by £111 million in January and deposits fell by £2.2 billion in January.

The BBA statistics director David Brooks said, “The high street banks'' mortgage lending is still seeing double-digit annual growth, albeit in a much slower market. Lower borrowing costs and falling property prices have underpinned demand at these lenders, who are providing over two-thirds of all new mortgage lending.

There is only limited demand from households for unsecured credit, while a fall in their deposits in January reflects a tendency to draw on cash or to move into alternative financial products.”

Homebuilder to Book £1.63 billion of write-downs

Bloomberg News reported today that analysts project that U.K. homebuilder will announce a further £1.63 billion of write-downs to landholdings this year on dropping prices.

Barratt Developments Plc will release its earnings results tomorrow.

Gainers & Losers

Thomson Reuters led gainers in the FTSE 100 index shares with a rise of 6.6% followed by increases in Experian Plc of 4.6%, in Royal Bank of Scotland of 4.3%, in Serco Group of 3.8%, and Rexam Plc of 3.5%.

Friends Provident led decliners in the FTSE 100 index shares with a decline of 9.8% followed by losses in Prudential Plc of 7.6%, in Lloyds Banking of 5.1%, in Aviva Plc of 5.1%, and Eurasian Natural of 4.9%.