To say that yesterday (29th September) was an interesting day for the global banking sector is quite an understatement and there could well be more trouble to follow.

In this country, it was announced that the Bradford and Bingley was to be nationalised, with the government buying out the company’s mortgage and personal loans business and selling the savings onto Santander.

At the same time in the US, politicians announced a $700 billion plan to rescue the American banking and mortgage loan sector, by buying out bad credit loan debts accrued by the banks in an attempt to restore some liquidity to the sector. Meanwhile, one of the US’s largest banks, Wachovia, was taken over by Citygroup bank and Fortis was saved by a rescue plan from three Governments.

The rescue plan from the US Government had been developed over the end of last week and the weekend and was announced yesterday morning, but the plan was rejected by Congress when they voted on it later on in the day, by 228 votes to 205.

The original plan was to release $250 billion immediately, with an additional $100 billion made available on request to buy out bad mortgage loan debts and a further $350 billion to be released at a later date. In return for the funding, the Government would take a stake in each of the banks.

George W Bush is expected to make a statement today following the rejection of the bail out plan and a new package needs to be agreed urgently in order to rescue the global banking and mortgage loan sector and prevent further casualties.

Share prices in banking stocks took a large hit yesterday and the same is expected for today. So far this year, fourteen commercial banks have collapsed and unless something is done soon, more are likely to follow.

It was around a year ago when the big headline in both the financial and national press was the collapse of Northern Rock and the subsequent nationalisation of the lender by the Government.

It now appears as though this was just the tip of the iceberg, one year on and things don’t seem to have got any better, as the Government have announced this morning (29th September) that it has just agreed to nationalise Bradford and Bingley and has acquired all the shares in the struggling mortgage lender.

Bradford and Bingley has been in trouble for a number of months and attempted to raise additional funding from its shareholders a few months ago by launching a rights issue, which failed to restore adequate liquidity to the company. Only last week, the company announced that it was making 370 members of staff redundant, by closing its homeowner loan processing centre and getting rid of its mortgage advisers in an attempt to save more money.

The savings part of Bradford and Bingley’s business, which currently holds around £22.2 billion in deposit savings, is to be sold to Santander, the Spanish bank who seem to be snapping up bargains in the financial sector at the moment and already own Abbey and the Alliance and Leicester.

The remainder of the business will be nationalised and public money will now be used to underwrite the lenders £41.3 billion worth of mortgages and personal loans. Today’s news comes less than a week after Lloyds TSB announced that it was taking over Halifax Bank of Scotland to create the largest banking group in the UK.

The Bradford and Bingley board reassured their customers that their savings were in safe hands with Santander and that customers who currently held mortgages and personal loans with them should continue to make their payments as normal.

The Chancellor of the Exchequer, Alistair Darling said “The Government, on the advice of the Financial Services Authority and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers.”

One of the biggest stories in the financial press last year was the collapse of Northern Rock and its subsequent nationalisation by the Government. Since that time, it has remained in the news as various developments within the company have unfolded.

The latest news to come out is not something Northern Rock are likely to be very proud of, as a recent survey has shown that the major lender has suffered a higher number of repossessions on its customers’ mortgages and homeowner loans than any other mainstream lender.

According to the report, out of all the home owners in the UK who have had their property repossessed this year, one in thirteen of them held their mortgage with Northern Rock. During the first three months of this year there were a total of 134 Northern Rock borrowers facing repossession, however during the second quarter of the year, this figure had jumped alarmingly to 353.

The number of borrowers who have fallen into an arrears situation of three months or more has also increased dramatically, leading to fears that the situation could get worse before it gets better.

One reason why Northern Rock borrowers are suffering such a high level of repossessions could be down to the type of mortgages and homeowner loans offered by the organisation.

Although these loans have all been classed as prime mortgages, Northern Rock were the biggest provider of mortgage loans with a loan to value in excess of 100 per cent. Their Together range of products offered customers a mortgage loan of 95 per cent, plus an additional unsecured loan of up to 30 per cent, making a total loan to value ratio of 125 per cent.

This places borrowers into an immediate negative equity situation with their loan and when house prices have fallen, the problem becomes worse. When a borrower in this situation gets into difficulty with their repayments, there is not the same incentive for them to try and keep the house as someone who may have some equity in the property and many will be tempted to simply walk away from the problem rather than try and sort it out.

Of course, this means more expense for the already troubled Northern Rock and it is likely that these costs will be passed onto the UK taxpayers, to bail the lender out yet further.

Most people in the UK have their own bank current account and the majority of these automatically have an overdraft facility incorporated within it.

In many cases this facility is never used, but a large number of people use their overdraft on a regular basis. In some cases, they just dip into it at the end of the month, prior to being paid, but other individuals may have large overdraft facilities which they use to cover their day to day living expenses and constantly remain in the red with their accounts.

A recent report has revealed that several major high street banks have increased the interest rate which they are charging on overdrafts, without letting customers know about the increases and are achieving this through the small print of the terms and conditions of the overdraft agreements. In some cases, a customer with an overdraft could be charged up to 20 per cent for overdraft interest. It is thought that this is one way the banks are finding to recoup the losses they have made recently in other parts of their business.

For those individuals who are constantly using their overdraft facility, it may well be prudent to check on exactly what interest rate they are paying and then consider alternatives such as taking out a personal loan to repay the debt. Even with an unsecured loan, it could be possible, in some cases, to reduce the interest rate payable by half. In many cases it may even be possible to obtain a cheap loan, compared to the overdraft rate, with the same bank, although how many will actually offer this option to their customers unless they ask for it?

The Liberal Democrats have raised the issue of these charges with the Office of Fair Trading, their spokesman said “This may not be technically illegal, but it is the sharpest of sharp practices. Banks must not be allowed to screw their customers to make up for losses made elsewhere.”

Defending the charges, a spokesman for the British Bankers Association said “Banks offer a range of overdraft and lending products to suit customers’ needs and are constantly reviewing what they offer in the light of demand.”

According to new research from the Co-Operative bank and Places for People, it seems as though first time buyers are eventually starting to become more realistic and sensible about the amount of deposit they require and also the maximum amount of mortgage or homeowner loan in which they can afford.

The survey, which was carried out on 1500 potential first time buyers, showed that most individuals who are looking to buy their first home expect it to be two years before they can seriously think about applying for a homeowner loan and that, on average, they will need to save up a deposit of £19,100, due to the lack of high loan to value mortgage products in the market place.

Attitudes amongst first time buyers have changed significantly since the start of the credit crunch. Only nine per cent of those interviewed said that they were not prepared to make any financial sacrifices, such as cancelling holidays and stopping going out, in order to be able to buy a house, this figure was up at 57 per cent at the same time last year.

Almost half of those looking to buy have also lowered the price range of properties they are considering, due to the long term affordability of the mortgage loan and many are prepared to sacrifice an additional bathroom, or bedroom, or buy a smaller house to be able to get onto the property ladder.

This is a welcome change amongst first time buyers, who seem at last to be lowering their expectations and taking a far more sensible approach to borrowing on a homeowner loan or mortgage.

This attitude will serve them well in their financial future and also help the housing and mortgage loan markets recover over the longer term and hopefully assist in avoiding a repeat of the current financial mess which both the industry and many individuals with loans they can no longer afford, find themselves in.