Pound Drops Versus Dollar on B&B Seizure, Before Mortgage Data

By Agnes Lovasz and Andrew MacAskill

Sept. 29 (Bloomberg) -- The pound dropped against the dollar after the U.K. government seized Bradford & Bingley Plc, Britain's biggest lender to landlords, as the credit crisis deepened.

The pound declined the most in more than a week versus the U.S. currency before a report that will probably show U.K. mortgage approvals slid to the lowest level since at least 1999. President George W. Bush and Congressional leaders agreed on a $700 billion plan to revive credit markets by purchasing banks' distressed debt.

The pound slid to $1.8102, the lowest level since Sept. 19, as of 8:24 a.m. in London, from $1.8445 at the end of last week. Against the euro, the pound traded little changed at 79.26 pence, from 79.23 pence.

Banco Santander SA, Spain's biggest bank, will pay 612 million pounds to buy Bradford & Bingley branches and deposits, the U.K. Treasury said today in a statement. The British lender became the country's second bank, after Northern Rock Plc, to be nationalized this year as survivors of the global credit crunch balked at swallowing all the risks facing weaker competitors.

Lenders probably granted 30,000 loans for house purchases in August, the Bank of England will say, according to the median estimate of 27 economists in a Bloomberg survey. The central bank is scheduled to release the mortgage data today at 9:30 a.m. in London.

The credit crunch has starved the housing market of loans and threatened to push the U.K. economy into a recession. In an attempt to stimulate growth, the Bank of England will lower its benchmark interest rate as soon as next month, Citigroup Inc. said on Sept. 26, revising an earlier prediction for no reduction until next year. Policy makers next meet to review rates on Oct. 9.

U.S. Bailout

U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House.

U.K. government bonds gained. The yield on the 10-year note fell 1 basis point to 4.53 percent as of 8:25 a.m. in London. The 5 percent security due March 2018 gained 0.10, or 1 pound per 1,000-pound ($1,810) face amount, to 103.55.

The yield on the two-year note dropped 3 basis points to 4.22 percent. Bond yields move inversely to prices.

Policy makers kept the benchmark interest rate unchanged on Sept. 4 as they weighed the risks of accelerating inflation against the danger that mounting bank losses will push Europe's second-biggest economy into its first recession since 1991.

To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net