MORTGAGES plc, owned by Merrill Lynch, is expected to become the first big Scottish casualty of the credit crunch with sources predicting a significant number of jobs will be lost.
The specialist lender's main UK operations centre employs 225 staff in Glasgow and sources say a cull would be a serious blow to the city's ambitions to build its financial services sector.
When Mortgages plc was launched in 1998 it focused
on sub-prime business but it has since diversified into more mainstream lending and other specialist sectors, such as buy-to-let. It was bought by Merrill Lynch in 2004.
Mortgages plc's chief executive Trevor Pothecary, who also sat on the Merrill Lynch International Bank board, is understood to have retired and has not been replaced.
Last week management is thought to have told many of its Glasgow staff they could face redundancy. Some executives are believed to have started working out their notice.
A source told Scotland on Sunday: "Mortgages plc has completely withdrawn from doing new mortgage business. All it will do now is service its back book of lending which is worth a few billion pounds. I can't imagine it would need more than a handful of staff in Glasgow to do this as there are no loans to underwrite. Trevor Pothecary has already left. He retired a few days ago."
Last month the lender's parent Merrill Lynch revealed an additional $4.5bn (£2.3bn) in write-downs connected to US sub-prime deals and announced 4,000 job cuts across the group.
The threat of redundancies at Mortgages plc first surfaced in November when the extent of the US sub-prime crisis started to become clear. At that time the lender confirmed its headcount could be reduced, with Peter Beaumont, deputy chief executive, saying: "Mortgages plc, in common with most non-conforming lenders, has reduced its new business activities until such time as confidence is restored and the market resumes normal functioning once again."
This scaling back was carried out despite the firm receiving a £1.1m grant from the Scottish Government through the Regional Selective Assistance (RSA) scheme in the third quarter of last year to create up to 152 jobs.
Over the past few months Mortgages plc has been taking steps to reduce its lending. During March it pulled all its fixed-rate mortgages and withdrew from buy-to-let.
A spokesman for Merrill Lynch said: "Merrill Lynch has suspended lending out of its two wholly-owned mortgage businesses, Mortgages plc and Wave Lending for the foreseeable future in response to continuing dislocation in mortgage markets. The mortgage businesses will continue to maintain their servicing operations."
The crisis at the company will be a blow to Glasgow's attempts to create an international financial services district. The city has lured a number of blue chip firms, but mainly in supporting services which are considered by some to be vulnerable to a downturn.
Despite the UK economy continuing to suffer in the credit crunch, the Bank of England's Monetary Policy Committee is not expected to reduce the base rate from its current level of 5% this week.
The full article contains 530 words and appears in Scotland On Sunday newspaper.
