British subprime specialist Victoria Mortgages became the latest victim of the credit crisis on Monday, as the lender said it had gone into administration and was no longer funding new loans after its costs escalated.
Like many other mortgage lenders in Britain's "adverse credit" sector, Victoria depended on the wholesale market to fund mortgages, but recent turmoil has dried up liquidity there, pushing up the cost of borrowing for lenders like Victoria.
The firm, which industry experts say is the first British lender to go into administration in the current crisis, is one of the smaller players in Britain's niche subprime mortgage market. Officials at Victoria did not comment on the size of its market share or loan book on Monday.
Backed by U.S. venture capital group Venturion Capital, Victoria was launched just over two years ago, offering a range of products from self-certified mortgages for "prime" borrowers to mortgages for borrowers with "heavy adverse" credit.
Following a model popular across the sector, Victoria originated mortgages then pooled them and sold them on to larger financial institutions.
Rates have been rising across Britain's subprime mortgage market as a result of credit market turbulence, and other lenders dependent on wholesale funding -- including Unity Homeloans and Infinity Mortgages, both backed by South African bank Investec -- have withdrawn their product ranges as a result of rising wholesale funding costs.
Unity and Infinity say they intend to return when market conditions stabilize.
Mainstream mortgage lenders Northern Rock and Alliance & Leicester both originate subprime loans for Lehman Brothers. The banks, for whom "non conforming" loans represent just a fraction of overall mortgage business, say they are still originating new business for Lehman.
Britain's subprime mortgage market is far smaller and more recent than its U.S. counterpart. Subprime loans accounted for around 8% of British lending in 2006 but 20% of U.S. lending.