Lehman bankruptcy ‘could squeeze mortgage market’

19 September 2008

It is feared that Lehman Brothers’ recent application for bankruptcy protection could increase the pressure on the mortgage market and hinder the Government’s bid to rejuvenate the weakening economy.

Some of Lehman’s core assets have been bought out by Barclays, including the North American investment banking and trading unit, as well as their New York headquarters and two data centres, in a move that may relieve some of the pressure caused by the company’s failure.

However, BBC Business Editor Robert Peston had said earlier that Barclays would not be interested in acquiring Lehman’s “toxic investments in the residential and commercial property markets”, meaning the mortgage market is highly unlikely to benefit from the sales.

The collapse of Lehman Brothers, meanwhile, adds further uncertainty to a global economy already experiencing limited liquidity due to the unwillingness of banks and other financial institutions to do business on the wholesale finance market.

The news is likely to lower confidence amongst lenders and borrowers alike, meaning the loan and mortgage markets may suffer a setback in the coming weeks.

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