From: "Nebulous" 
Newsgroups: uk.finance
Subject: Re: Fixed Rate Mortgages
Date: Tue, 18 Jan 2005 06:46:40 -0000


"Jon Green"  wrote in message
news:idjou0t0gncim22bo1rfr2vtontg371490@4ax.com...
> Phil Richards  wrote:
>
> > Reading through the small print on the information on the various
products
> > of one High Street Bank's mortgages, I see the phrase "Fixed rate
mortgages
> > are subject to availability of funds".
> >
> > Any ideas as to what that means?
>
> Fixed rate mortgages put the bank at significant risk, since they will
> cost it a fortune if the Base Rate hits the roof for any substantial
> amount of time.  (Yes, the banks hedge, but only to a certain extent.)
> Thus, the banks only set aside a limited amount of the available
> deposits for fixed-rate mortgages, so that a serious rate hike doesn't
> prejudice the viability of their general operations.
>
> At least, that's my understanding of it.
>
>
I understood that banks in particular do not like risk, so they would
borrrow a large sum of money on a long-term basis at a rate they were happy
with. They would then mark it up to cover their profit and a percentage for
defaults and lend it as fixed rate.

The situation may have changed now, but in the financial pages of newspapers
it used to say the limit when discussing fixed rates. Fixed rates were much
rarer then and it would say 'bank A has £50 million available at this rate'

Nebulous