/24-7PressRelease/ - LONDON, UK, December 14, 2007 - The Financial Services Authority has warned the mortgage lenders to prepare themselves for tough market conditions in the coming year by ensuring adequate levels of liquidity. The figures from the FSA suggest that at least 1.4 million short-term fixed- rate mortgages are going to expire in the year 2008.
Many borrowers would find it difficult to refinance their mortgages at favourable terms. The tightening credit conditions in the UK financial markets will adversely affect their capabilities to refinance at competitive rates. Borrowers having bad credit may even fail to refinance their mortgages.
The FSA wants lenders to secure protection in the form of sufficient liquidity to meet the challenges likely to be faced in the year 2008. Clive Briault, retail managing director at the FSA, said: "It would be prudent to pay a correspondingly high price -- and to forego some profits -- to secure this protection, or otherwise to scale back balance sheet growth."
Northern Rock, the Britain's major mortgage lender, nearly collapsed when the wholesale market on which it depended to fund its mortgage lending dried up completely. The FSA asked the lenders to consider contingency plans like retail deposit withdrawals and employing managers who have experience to fight tough market conditions.
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