House Price Crash Discussion Thread

brit1234

If prices can fall in west London then they can fall anywhere.

John_Pierpoint

Generali wrote: »

Newcastle BS 2007 Annual Report:

http://online.newcastle.co.uk/press_office/AGM2007/randc2006.pdf

What you might be interested in is on page 30, note 11. Am I right?

Hi Generali,

Pass the wet towel for my fevered brow, it is too late at night for my grey cells.
I was actually wondering about the volatility of the Society's deposits rather than the toxic nature of its investments.

Anyway looking in the rear view mirror at the balance sheet resulting from events that happened in 2006:
It seems that there was 3 and a half billion invested in "loans and advances to customers", presumably mainly "normal" mortgages to borrowers.
Then there was another half a billion in revolving "financial instruments" aka "transferable debt securities" valued at what the directors think they are worth.
This used to be the part of the accounts where less risky "rainy day" money was kept.

If there are any bombs on board, presumably they are hidden in this roughly one pound in seven of their loans - more of a car bomb than a 9/11 experience?

My problem is I don't know if this fairly stable situation is typical for such an organisation. How, for example would similar figures and ratios appear in the accounts of Bradford & Bingley and Alliance and Leicester?

I cannot remember who was talking but one of the interviewees on Radio4 "Today" on Monday morning said something like "If the government is rushing through nationalisation powers like this, what do they know that we don't".

I'll sleep on it.

John.

jimc_2

Mr._H wrote: »

With the base-rate dropping to 5.25%, the threat of the big "shock" that people on fixed-rate mortgages were facing has diminished.

I agree with HLLGH that just looking at the base-rate figure is completely misleading.

When he was talking at a press conference for the Inflation Report a few days ago, Mervyn King predicted static house prices producing gently shifting price to earnings ratios over the next five years. No drop - only the rest of the economy catching up. And over five years!

He also mentioned the decoupling of lenders' rates and base rates since all lenders will want to rebuild margins. What he meant was that even if the official bank base rate drops, mortgages are still going up. More expensive mortgages in the future will severely dent any 'profit' from a 'sell now, rent and buy later' scheme.

WTF?_2

jimc wrote: »

He also mentioned the decoupling of lenders' rates and base rates since all lenders will want to rebuild margins. What he meant was that even if the official bank base rate drops, mortgages are still going up. More expensive mortgages in the future will severely dent any 'profit' from a 'sell now, rent and buy later' scheme.

Yes - in fact, the new NR business plan is to move away from mortgage exposure by upping their SVRs and 'encouraging' the mortgage customers to switch to another provider, restoring the bank's capital ratios.

It's quite likely that many banks will be seeking to squeeze borrowers in this way so the end result is going to be that for a lot of people with less than ideal LTVs or credit ratings, they will find themselves paying higher monthly repayments irrespective of central bank interest rates.


People need to remember that credit is normally only ever available easily to people who really don't need it. The last few years of CDO powered lending were an aberration and lenders will be looking to call as much of the money given away so freely, back in.

In the future if you find yourself needing credit, be prepared to pay through the nose for it if you can get it at all.

Trollfever

People need to remember that credit is normally only ever available easily to people who really don't need it.

Anecdotal evidence posted in these forums suggests that the party is now over and that there will be a huge hangover that will last for years.

Generali

John_Pierpoint wrote: »

Hi Generali,

Pass the wet towel for my fevered brow, it is too late at night for my grey cells.
I was actually wondering about the volatility of the Society's deposits rather than the toxic nature of its investments.

Anyway looking in the rear view mirror at the balance sheet resulting from events that happened in 2006:
It seems that there was 3 and a half billion invested in "loans and advances to customers", presumably mainly "normal" mortgages to borrowers.
Then there was another half a billion in revolving "financial instruments" aka "transferable debt securities" valued at what the directors think they are worth.
This used to be the part of the accounts where less risky "rainy day" money was kept.

If there are any bombs on board, presumably they are hidden in this roughly one pound in seven of their loans - more of a car bomb than a 9/11 experience?

My problem is I don't know if this fairly stable situation is typical for such an organisation. How, for example would similar figures and ratios appear in the accounts of Bradford & Bingley and Alliance and Leicester?

I cannot remember who was talking but one of the interviewees on Radio4 "Today" on Monday morning said something like "If the government is rushing through nationalisation powers like this, what do they know that we don't".

I'll sleep on it.

John.

I don't think you can see the volitility of depositors accounts from these accounts and I would imagine that the directors would only have to include it if it was a 'material risk', eg if the NRK-style queues were forming.

Speaking as someone that looks after the hedge fund side of asset valuation with auditors and fund administrators, I wish it was as easy as me coming up with a valuation in my head. We have some pretty illiquid holdings (eg traded once a week, typically) and I have a bun fight with the accountants every month over their valuation - every single time I lose despite the fact that I'm clearly in the right.

The last bank nationalisation (JMB) was pushed through Parliament in a day I think. According to the times this morning a lawyer (presumably with a sense of humour) requested that the Govt pay the notional pound to buy it using 2x50p rather than a pound note, "...better to use metal than a promissary note for a transaction like this I think...".

carolt

Shame..... :rolleyes:


http://news.bbc.co.uk/1/hi/business/7253527.stm

House price 'threat' to economy

A downward spiral of falling house prices and reduced mortgage lending poses the biggest short-term threat to the economy, says a leading economist.

Kate Barker, a member of the Bank of England's Monetary Policy Committee, warned that the bank would not be able to stop this in the short term.....

SouthCoast

Batten down the hatches.

Stormy waters ahead,

ManAtHome

carolt wrote: »

Kate Barker, a member of the Bank of England's Monetary Policy Committee, warned that the bank would not be able to stop this in the short term.....

Well I've read it a couple of times, and can't make much more sense of it than "Yeh, but, no but, yeh but, no but" (translation - whatever happens, I'll be able to raise a selective "told yer so" quote...).

MiserlyMartin

Basically she is almost admitting that there is not much the MPC can do to prevent a house price fall. Due to inflation they can't cut rates anymore. They are stuffed.