House prices fall for second month in August by 0.9%, following the 0.5% the previous month. Well no surprises for us in this 'so called' news.
When Mortgage lending is now so difficult to obtain, the money side demand for housing just had to fall away.
However link this to falling UK Manufacturing and there is surely a real depression here in both housing demand and business. Tie this to the bank's which generally have 'security' on directors main residence and the downward spiral must continue.
Thursday, 2 September 2010
Tuesday, 17 August 2010
Mortgage Arrears in the US - UK to Follow
Although mortgage rates have plunged to record lows, falling borrowing costs have failed to revive the US housing market. Indeed, the Washington deliberations, which will centre on what the level of government support for Fannie and Freddie should be, comes amid continuing pain for homeowners.
In the average congressional district, serious mortgage delinquency rates – defined as borrowers more than three months behind on their payments – are 9.4%, compared to 3.3% at the time of the election in 2008, according to a study by Deutsche Bank.
“That pace of deterioration alone should put housing and mortgage finance on most political radars,” said Steven Abrahams, managing director at Deutsche.
The problem remains concentrated in states such as Florida, California and Nevada. More than one in five borrowers (over 20%) are at least three months overdue on their mortgage payments in 23 congressional districts – including 13 in Florida, six in California and two in Nevada.
Will this malaise be found in the UK or is it already here?
In the average congressional district, serious mortgage delinquency rates – defined as borrowers more than three months behind on their payments – are 9.4%, compared to 3.3% at the time of the election in 2008, according to a study by Deutsche Bank.
“That pace of deterioration alone should put housing and mortgage finance on most political radars,” said Steven Abrahams, managing director at Deutsche.
The problem remains concentrated in states such as Florida, California and Nevada. More than one in five borrowers (over 20%) are at least three months overdue on their mortgage payments in 23 congressional districts – including 13 in Florida, six in California and two in Nevada.
Will this malaise be found in the UK or is it already here?
Tuesday, 10 August 2010
The Rape of Britain
Article courtesy of Nadeem Walayat
The Bank of England kept UK interests on hold at 0.5% last week as it continues its policy of IGNORING HIGH UK inflation that continues to stand above the Bank of England's 3% upper limit for the purpose of the BoE continuing to funnel tax payer cash onto the balance sheet of bailed out bankrupt banks as illustrated by the most recent banking sector profit announcements, most of which are fictitious as in actual fact the banks are not generating any profits because they continue to only partially write down bad debts.
The only reason why bankrupt banks are announcing profits is so as to allow them to pay their chief officers huge bonuses as a reward for succeeding in conning the tax payers by means of threats of financial armageddon as inept regulators with themselves having one hand in the cookie jar watch on as they intend to return to commercial banking themselves so as to have their turn at getting a piece of the tax payer funded bailout pie.
The ways and means by which these fictitious profits are being achieved are many, such as The Bank of England loaning the banks at 0.5% which they then run along and invest at zero risk in longer dated UK government stock at 3.5% and thus make a 3% risk free profit with the tax payers money, meanwhile the ordinary tax payers who have been saving hard all their working lives are seeing the value of their savings being stolen by means of the stealth inflation tax as banks drunk on central bank cash pay a pittance of less than 2% in interest whilst even the official doctored CPI inflation rages at 3.2%, well above the BOE target of 2%. And not to forget the government adding insult to injury by TAXING the pittance of interest received at 20% for basic rate and 40% for higher rate tax payers.
Similarly borrowers are not receiving anywhere near 0.5% for loans and mortgages as most mortgage borrowers will be lucky to see any rate below 4% with many on rates of as high as 6% which is resulting in huge profit margins for the banks that continue to penalise their customers for their own mistakes.
Where savers and borrowers are concerned Britain would be far better off with a nationalised banking sector that exists purely to service the loans and savings market rather than the bankster elite maximising the amount of money that can be stolen from tax payers, savers and borrowers by means of an officially sanctioned artificial banking system.
The Bank of England kept UK interests on hold at 0.5% last week as it continues its policy of IGNORING HIGH UK inflation that continues to stand above the Bank of England's 3% upper limit for the purpose of the BoE continuing to funnel tax payer cash onto the balance sheet of bailed out bankrupt banks as illustrated by the most recent banking sector profit announcements, most of which are fictitious as in actual fact the banks are not generating any profits because they continue to only partially write down bad debts.
The only reason why bankrupt banks are announcing profits is so as to allow them to pay their chief officers huge bonuses as a reward for succeeding in conning the tax payers by means of threats of financial armageddon as inept regulators with themselves having one hand in the cookie jar watch on as they intend to return to commercial banking themselves so as to have their turn at getting a piece of the tax payer funded bailout pie.
The ways and means by which these fictitious profits are being achieved are many, such as The Bank of England loaning the banks at 0.5% which they then run along and invest at zero risk in longer dated UK government stock at 3.5% and thus make a 3% risk free profit with the tax payers money, meanwhile the ordinary tax payers who have been saving hard all their working lives are seeing the value of their savings being stolen by means of the stealth inflation tax as banks drunk on central bank cash pay a pittance of less than 2% in interest whilst even the official doctored CPI inflation rages at 3.2%, well above the BOE target of 2%. And not to forget the government adding insult to injury by TAXING the pittance of interest received at 20% for basic rate and 40% for higher rate tax payers.
Similarly borrowers are not receiving anywhere near 0.5% for loans and mortgages as most mortgage borrowers will be lucky to see any rate below 4% with many on rates of as high as 6% which is resulting in huge profit margins for the banks that continue to penalise their customers for their own mistakes.
Where savers and borrowers are concerned Britain would be far better off with a nationalised banking sector that exists purely to service the loans and savings market rather than the bankster elite maximising the amount of money that can be stolen from tax payers, savers and borrowers by means of an officially sanctioned artificial banking system.
Tuesday, 13 July 2010
Housing Crash for 20 years
At last, at last, the bigger names who comment on the housing market have woken up to the reality of the banking crisis and what it will mean for house prices in the UK.
We have Price Waterhouse, The RICS (Royal Institute of Chartered Surveyors), the Council of Mortgage Lenders and Capital Economics all now becoming very bearish on property. It's about time, we here since 2006 have been sounding warnings.
Now we have worse to come. As house values fall, and they will fall as there is no more "irrational" lending to prop them up, what will the banks do who have used property as collateral for business loans? They will have to call them in or re-finance at terms less attractive. And that means more deflation.
We are entering a period when our standards of living will have to fall. After all our standards of living went up due to the availability of "easy" credit. That credit has gone. BUT, everybody still expects growth, they expect expansion. Well the opposite is going to happen. More banks will fail, many many more bankruptcies will occur.
In the USA delinquent loans over the $1m mark stand at 14% of loans. So at what percentage delinquency do banks fail their solvency tests? And this will come to the UK as well. The Buy to Let Boom will see the buy to let bust. But will it bring down any banks? We will await to see. As there is no chance of a bail out, it would mean a big bank failing. Confidence would then collapse in our entire property based system.
So be warned. Do not jump into property now thinking we are at the bottom. We are still on the way down.
We have Price Waterhouse, The RICS (Royal Institute of Chartered Surveyors), the Council of Mortgage Lenders and Capital Economics all now becoming very bearish on property. It's about time, we here since 2006 have been sounding warnings.
Now we have worse to come. As house values fall, and they will fall as there is no more "irrational" lending to prop them up, what will the banks do who have used property as collateral for business loans? They will have to call them in or re-finance at terms less attractive. And that means more deflation.
We are entering a period when our standards of living will have to fall. After all our standards of living went up due to the availability of "easy" credit. That credit has gone. BUT, everybody still expects growth, they expect expansion. Well the opposite is going to happen. More banks will fail, many many more bankruptcies will occur.
In the USA delinquent loans over the $1m mark stand at 14% of loans. So at what percentage delinquency do banks fail their solvency tests? And this will come to the UK as well. The Buy to Let Boom will see the buy to let bust. But will it bring down any banks? We will await to see. As there is no chance of a bail out, it would mean a big bank failing. Confidence would then collapse in our entire property based system.
So be warned. Do not jump into property now thinking we are at the bottom. We are still on the way down.
Not Much Chance of Bank Funding
Access to finance for businesses remains difficult, says IoD survey
Dated: 13 July 2010
New data released today by the Institute of Directors (IoD) reveals that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates.
Key Findings
From a survey of 899 company directors carried out at the beginning of June 2010 the IoD can reveal the following data:
Applications and decline rates for finance
Security requested against loans
Commenting on the survey results, Miles Templeman, Director-General of the Institute of Directors, said:
“Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers.”
New data released today by the Institute of Directors (IoD) reveals that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates.
Key Findings
- 1 in 3 firms that applied for finance in the time period 1 January 2010 – June 2010 were declined by their bank.
- There is evidence that lending criteria have become more restrictive with regard to the amount of security requested by banks.
From a survey of 899 company directors carried out at the beginning of June 2010 the IoD can reveal the following data:
Applications and decline rates for finance
- 39% of IoD members’ firms applied for finance with a bank (applications include requests for renewals/extensions/new requests for overdrafts and loans) in the time period 1 January 2010 – June 2010.
- Of the 39% of IoD members’ firms which applied for finance in the time period 1 January 2010 – June 2010, 33% had an application for finance declined by a bank.
Security requested against loans
- 37% of IoD members stated that in the period 1 January 2010 – June 2010 they had noticed an increase in the amount of security being requested against any lending that their organisation sought.
Commenting on the survey results, Miles Templeman, Director-General of the Institute of Directors, said:
“Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers.”
Wednesday, 7 July 2010
More Poor House Price Data
Fears are growing over the state of the recovery in the housing market after new figures showed property prices have all but stalled.
The average cost of a home edged ahead by just 0.1 per cent to stand at £170,111 during the month, following a rise of 0.5 per cent in May, according to Nationwide Building Society.
The annual rate at which house prices are rising also fell for the second month in a row, dropping to 8.7 per cent, down from a year-on-year rise of 9.8 per cent in May.
The drop reflected the fact that house prices were increasing at a faster pace this time last year.
Nationwide said unless there was a significant pick-up in house price growth during the coming few months, the annual rate of house price inflation was likely to continue to drift lower.
Today's figures add to a raft of gloomy data on the property market, with figures from the Bank of England, released yesterday, showing that the number of mortgages approved for house purchase had remained broadly flat in May, as activity in the housing market failed to pick up.
Earlier this week the Land Registry reported a 0.2 per cent house price fall in England and Wales during May, while property intelligence group Hometrack said prices edged ahead by just 0.1 per cent during June as demand from potential buyers stalled.
Recent surveys have pointed to an increase in the number of homes being put up for sale, but this is failing to be matched by rising numbers of buyers. As a result the mismatch between supply and demand is beginning to ease, reducing the upward pressure on prices.
Howard Archer, chief UK and European economist at IHS Global Insight, said: 'The marginal house price rise in June reported by the Nationwide adds to a recent flurry of soft data on the housing market and further fuels our belief that house prices will struggle to make significant gains over the coming months and may very well be only flat overall through the rest of the year.'
Ed Stansfield, chief property economist at Capital Economics, is more pessimistic.
He said: 'After outstripping income growth for over a year now, house price gains more or less stalled in June.
'The impact of the fiscal squeeze on incomes and confidence is likely to drive house prices back down again over the next 18 months.'
But the slowdown in house price growth is not necessarily a bad thing.
House prices have risen by around 12 per cent since their low point in 2009 but many economists think the pick-up in the housing market has got too far ahead of the recovery in the wider economy.
Martin Gahbauer, Nationwide's chief economist, said: 'Last year house prices increased by more than 10 per cent from the trough and household earnings growth was only about 2 per cent, and it was flat or negative for some households.
'House prices were getting ahead of household earnings and that is not healthy in the long term.'
He expects house prices to 'stagnate' for the rest of the year as the supply of homes on the market continues to increase.
But although the slowdown in house price growth may be good news for the long-term health of the housing market, it is bad news in the short term for housebuilders.
Shares in major housebuilders, including Persimmon and Taylor Wimpey, were down 4 per cent today following the publication of Nationwide's figures.
The average cost of a home edged ahead by just 0.1 per cent to stand at £170,111 during the month, following a rise of 0.5 per cent in May, according to Nationwide Building Society.
The annual rate at which house prices are rising also fell for the second month in a row, dropping to 8.7 per cent, down from a year-on-year rise of 9.8 per cent in May.
The drop reflected the fact that house prices were increasing at a faster pace this time last year.
Nationwide said unless there was a significant pick-up in house price growth during the coming few months, the annual rate of house price inflation was likely to continue to drift lower.
Today's figures add to a raft of gloomy data on the property market, with figures from the Bank of England, released yesterday, showing that the number of mortgages approved for house purchase had remained broadly flat in May, as activity in the housing market failed to pick up.
Earlier this week the Land Registry reported a 0.2 per cent house price fall in England and Wales during May, while property intelligence group Hometrack said prices edged ahead by just 0.1 per cent during June as demand from potential buyers stalled.
Recent surveys have pointed to an increase in the number of homes being put up for sale, but this is failing to be matched by rising numbers of buyers. As a result the mismatch between supply and demand is beginning to ease, reducing the upward pressure on prices.
Howard Archer, chief UK and European economist at IHS Global Insight, said: 'The marginal house price rise in June reported by the Nationwide adds to a recent flurry of soft data on the housing market and further fuels our belief that house prices will struggle to make significant gains over the coming months and may very well be only flat overall through the rest of the year.'
Ed Stansfield, chief property economist at Capital Economics, is more pessimistic.
He said: 'After outstripping income growth for over a year now, house price gains more or less stalled in June.
'The impact of the fiscal squeeze on incomes and confidence is likely to drive house prices back down again over the next 18 months.'
But the slowdown in house price growth is not necessarily a bad thing.
House prices have risen by around 12 per cent since their low point in 2009 but many economists think the pick-up in the housing market has got too far ahead of the recovery in the wider economy.
Martin Gahbauer, Nationwide's chief economist, said: 'Last year house prices increased by more than 10 per cent from the trough and household earnings growth was only about 2 per cent, and it was flat or negative for some households.
'House prices were getting ahead of household earnings and that is not healthy in the long term.'
He expects house prices to 'stagnate' for the rest of the year as the supply of homes on the market continues to increase.
But although the slowdown in house price growth may be good news for the long-term health of the housing market, it is bad news in the short term for housebuilders.
Shares in major housebuilders, including Persimmon and Taylor Wimpey, were down 4 per cent today following the publication of Nationwide's figures.
Tuesday, 6 July 2010
Mortgage Lending and Property Values
NATIONWIDE, Britain’s biggest building society, has warned that house prices could drop 5% this year because of the credit crunch.Make that more like 20%!!
It is the first of the big lenders to publicly say values could fall. Its official forecast, and that of rival Halifax, is that prices will be flat this year.
Fionnuala Earley, chief economist at Nationwide, said: “We have always thought there was a risk of falls of up to 5% if the financial unrest carried on for longer than anticipated.” The prediction comes amid widespread fears of a mortgage “famine” as lenders rein in their lending.
Michael Coogan, of the Council of Mortgage Lenders, said: “We have entered a substantially slower phase in the housing market and there will be problems in the mortgage funding markets unless the Bank of England makes new, broader-based attempts to improve levels of liquidity.”The CML is still sticking with its official forecast of 1% house-price growth this year, but it admits privately that it may need to look at the prediction again later in the spring.
Mortgage rationing has so far affected only borrowers with smaller deposits or black marks on their credit files, but brokers said there are signs it is spreading. In the past fortnight, Mortgage Express, part of Bradford & Bingley, suspended all lending through brokers for one week, while Scottish Widows closed its phone lines to brokers. Halifax, Abbey and Lloyds TSB have also restricted deals available via brokers. Small building societies have been hardest hit. Bath pulled all its deals last week except those at its standard variable rate, saying the mortgage market had come to a “standstill”. Cheltenham & Gloucester, meanwhile, has said that borrowers relying on bonuses of more than £100,000 must now be referred to underwriters.
Jane McLelland, 31, of Tunbridge Wells, Kent, was forced to borrow £18,000 from her parents or face punitive rates when she came to remortgage after lenders valued her home at less than she had been expecting. With a mortgage of £198,000, she believed the property to be worth £220,000 and therefore needed to borrow 90% of the value of the property.However, Abbey said the 2-bedroom flat was worth just £200,000, taking her mortgage to 99% of the property value – but it does not offer loans on such high values.
McLelland said: “I bought my home two years ago for £200,000 and it was valued in October at £215,000. I was really disappointed that they downvalued it. Luckily, I had the option of finding more money so that I could reduce my loan to £180,000, or 90% with Abbey.”
Richard Morea of brokers L&C, said: “Surveyors are coming under increasing pressure to tighten their valuations as the property market starts to cool.”Ray Boulger, of John Charcol, a broker, said: “We had one client looking to remortgage with a £111,000 loan who was turned away because she couldn’t verify her address on the electoral roll despite other proof. Her property was worth £227,500 and we didn’t expect any problems, but her lender, Accord, didn’t agree.”
The above examples are becoming endemic in this mixed up market. But what happens when lenders wake up to the fact that valuations (valuations for mortgage purposes that is) are still sliding? The scenario is such that negative equity issues will become noticable. Then some lender will want more security, but if home owners cannot provide it will they want their money back, or at least a part?
If property prices keep falling, and there is NOTHING to stop them doing so (especially as lenders are so much more reluctant to actually lend), then the unshakeable faith we have in the UK, the 'culture' of property as an asset will be put to the test.
It will be bloody, personal bankrupcies will rocket and lenders will collapse. How else do you see it?
It is the first of the big lenders to publicly say values could fall. Its official forecast, and that of rival Halifax, is that prices will be flat this year.
Fionnuala Earley, chief economist at Nationwide, said: “We have always thought there was a risk of falls of up to 5% if the financial unrest carried on for longer than anticipated.” The prediction comes amid widespread fears of a mortgage “famine” as lenders rein in their lending.
Michael Coogan, of the Council of Mortgage Lenders, said: “We have entered a substantially slower phase in the housing market and there will be problems in the mortgage funding markets unless the Bank of England makes new, broader-based attempts to improve levels of liquidity.”The CML is still sticking with its official forecast of 1% house-price growth this year, but it admits privately that it may need to look at the prediction again later in the spring.
Mortgage rationing has so far affected only borrowers with smaller deposits or black marks on their credit files, but brokers said there are signs it is spreading. In the past fortnight, Mortgage Express, part of Bradford & Bingley, suspended all lending through brokers for one week, while Scottish Widows closed its phone lines to brokers. Halifax, Abbey and Lloyds TSB have also restricted deals available via brokers. Small building societies have been hardest hit. Bath pulled all its deals last week except those at its standard variable rate, saying the mortgage market had come to a “standstill”. Cheltenham & Gloucester, meanwhile, has said that borrowers relying on bonuses of more than £100,000 must now be referred to underwriters.
Jane McLelland, 31, of Tunbridge Wells, Kent, was forced to borrow £18,000 from her parents or face punitive rates when she came to remortgage after lenders valued her home at less than she had been expecting. With a mortgage of £198,000, she believed the property to be worth £220,000 and therefore needed to borrow 90% of the value of the property.However, Abbey said the 2-bedroom flat was worth just £200,000, taking her mortgage to 99% of the property value – but it does not offer loans on such high values.
McLelland said: “I bought my home two years ago for £200,000 and it was valued in October at £215,000. I was really disappointed that they downvalued it. Luckily, I had the option of finding more money so that I could reduce my loan to £180,000, or 90% with Abbey.”
Richard Morea of brokers L&C, said: “Surveyors are coming under increasing pressure to tighten their valuations as the property market starts to cool.”Ray Boulger, of John Charcol, a broker, said: “We had one client looking to remortgage with a £111,000 loan who was turned away because she couldn’t verify her address on the electoral roll despite other proof. Her property was worth £227,500 and we didn’t expect any problems, but her lender, Accord, didn’t agree.”
The above examples are becoming endemic in this mixed up market. But what happens when lenders wake up to the fact that valuations (valuations for mortgage purposes that is) are still sliding? The scenario is such that negative equity issues will become noticable. Then some lender will want more security, but if home owners cannot provide it will they want their money back, or at least a part?
If property prices keep falling, and there is NOTHING to stop them doing so (especially as lenders are so much more reluctant to actually lend), then the unshakeable faith we have in the UK, the 'culture' of property as an asset will be put to the test.
It will be bloody, personal bankrupcies will rocket and lenders will collapse. How else do you see it?
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