HBOS sells mortgage backed bonds

by Gill Montia

Story link: HBOS sells mortgage backed bonds

HBOS could be leading the way out of the credit crisis. The bank, which is the owner of Halifax, and is the UK’s largest mortgage lender, has sold mortgage backed bonds worth £500 million.

The deal has become headline news because it is the first sale of its kind by a UK bank since the US sub-prime mortgage crisis took grip last August.

The market for such securities seized up months ago as investors questioned the underlying quality of the mortgages they contained.

As a result, lenders have been unable to raise the cash to fund new business and the UK property market has slowed dramatically in what has become a mortgage famine.

The amount of money raised by HBOS on this occasion is regarded as small for a bank of this size.

The sale also entails an interest rate of 6.7%, which is 0.85% above Libor.

However, news of the sale has been greeted with enthusiasm in the UK banking sector as it at least a sign that confidence is returning to the money markets.