Panic at the Bank of England

FaTB

Personally i've fancied the idea of a crash in house prices for a while.

But now it's actually beginning to happen its making me feel quite nervous.

I'm no financial expert, but i'm getting a really bad feeling about what going on at the moment, as I feel it's gonna come along with the mother of all recessions.

I work in manufacturing (old fashioned I know), so if it gets bad, i'll probably be one of the first getting made redundant, and I still won't be able to buy a house !!

So many seem to have such short memories, I remember the last crash / recession, it was only 15 years ago, & the last time I was made redundant.

Why do so many think it can't happen again ?

If anything I think it could be worse this time !!

ManAtHome

danm wrote: »

the credit crunch has very little to do directly with the UK market.

Of course it has - LIBOR is high because banks don't know who's holding the "toxic waste" so are keeping their cash under their matresses (and/or in case they have to bring some of it onto their books).

danm

ManAtHome wrote: »

Of course it has - LIBOR is high because banks don't know who's holding the "toxic waste" so are keeping their cash under their matresses (and/or in case they have to bring some of it onto their books).

my point was that the 'toxic waste' securities are not those issued by UK banks. it is not our housing market that is causing the RMBS market defaults. Its the US

Generali

danm wrote: »

the credit crunch has very little to do directly with the UK market.

I'm 99% certain that no UK lenders mortgage securities have contributed to the defaults and losses that the investment banks have reported.

Whether the UK consumer has over-extended themselves to the point that will impact the markets like the US is still unknown.

No govt actions have been as a result of UK banks over-lending to less credit-worthy individuals. Obviously that doesn't mean that it will not happen in the future.

All the central banks are trying to do is restore liquidity and confidence to the markets

The risks are the same with UK originated MBSs/CDOs/CDO^n etc as those from the US IMO. If default levels start to rise (as 2 year fixes come to an end for example) then UK originated debt backed securities will show losses in a similar way, presumably. AFAIK, they are structured in much the same way.

<ot>There was an interesting piece on the Goldman Sachs website today that mentioned that houses bought with 'conforming loans' (ie not subrime/Alt-A nor bought with a mortgage over ~$400k) are now starting to fall in price on average - the mess over there is starting to hit the wealth of 'ordinary hard-working Americans' not just basket cases and the over-indebted.</ot>

danm

Generali wrote: »

The risks are the same with UK originated MBSs/CDOs/CDO^n etc as those from the US IMO. If default levels start to rise (as 2 year fixes come to an end for example) then UK originated debt backed securities will show losses in a similar way, presumably. AFAIK, they are structured in much the same way.

<ot>There was an interesting piece on the Goldman Sachs website today that mentioned that houses bought with 'conforming loans' (ie not subrime/Alt-A nor bought with a mortgage over ~$400k) are now starting to fall in price on average - the mess over there is starting to hit the wealth of 'ordinary hard-working Americans' not just basket cases and the over-indebted.</ot>

Agree that the risks are the same, but our ABS market is a drop in the ocean in comparison to the US.
Not got the exact numbers, but i would suggest we could see defaults double and there be a neglible effect on the securities.

Even if affordability is a concern when 2 year fixes end, the fundamentals in the market are still quite good.

Take a borrower whose initial LTV was 95%. After two year, LTV is 75% due to price of house increasing. Goes into arrears, house repossessed. If we assume a 10% fall in house prices and 20% in recovery costs, you are still only looking at a 5% loss on the loan.

fc123

FaTB wrote: »

Personally i've fancied the idea of a crash in house prices for a while.

But now it's actually beginning to happen its making me feel quite nervous.

I'm no financial expert, but i'm getting a really bad feeling about what going on at the moment, as I feel it's gonna come along with the mother of all recessions.

I work in manufacturing (old fashioned I know), so if it gets bad, i'll probably be one of the first getting made redundant, and I still won't be able to buy a house !!

So many seem to have such short memories, I remember the last crash / recession, it was only 15 years ago, & the last time I was made redundant.

Why do so many think it can't happen again ?

If anything I think it could be worse this time !!

Well, we're going to be shafted!!
I own a large, eclectic boutique (I even MAKE clothing in The UK ..mad) so a spending downturn affects us directly...already this Sept, Oct, Nov have been DIRE. In fact, we can boast of having the worst Saturdays sales ALL year last Sat ..the storm day....(even worse than the 3rd wk in Jan!)..........

We want to sell our house to re-locate to the area we now rent in but the EA said the only offers coming in were 20 - 30% below asking so we renewed the tenacy for our tenants for a further 6 mnths...we need thinking time....but I hate renting.

OH is also a chippy...and has just gone back to work (after helping me for 2 yrs after we lost our rent review so had to let staff go) but that will all dry up I guess...

Oh yes...and we have a great big chunk of debt to still clear (no, not from profligate spending, but from being shafted on a contract) that was going to be gone by Feb 08..but, with sales down...all my careful MSE forecasts are all wrong....so the debt will take a further 8 mnths to clear.

We had our kids when young so @ 44, instead of relaxing a bit and enjoying the rewards of all that hard work, I have a bad feeling that it's going to be like starting all over again....am really dreading the next year...everything feels so "unknown"....but I don't have that twentysomething, positive outlook on life anymore........you know..the feeling that with effort, energy and skill, one can "do anything"....because, now, I know that not to be true.

I also am acquainted with some of these wealthy bankers socially...their not so smart you know...and that upsets me even more!
But they do have some big homes!

twhurl

acook wrote: »

Well, maybe my language is a little sensationalist.

However, I do think something very unpleasant is happening within the banking system; both here; in the US and in Europe. At the center of this unfolding crisis is the housing market. In many countries - the UK, the US, Spain, Ireland, and Australia - house prices have accelerated beyond what could be described as reasonable.

This surge has been driven up by easy credit. Now, the underlying asset - house prices - is beginning to fall, and it threatens to make a fair proportion of that credit worthless. Not all of it, to be sure, but enough to threaten the banking system.

There might not yet be panic on the streets of London, but I am sure that there is panic in the city of London, and in Wall street.

Alice

http://ukhousebubble.blogspot.com

So you think they are going to let everything inflate except the asset that all their loans and assets are based on. So they will watch that happen and when property deflates far enough so their loans are too risky and worthless they will call them in and flood the market with worthless property in an attempt to salvage some of their money. These assets will then be bought at firesale prices by wealthy arab and asian countries. To top it off we get the added spectacle of peole running around the streets screaming and trying to sell their house to anyone whilst their tea goes cold.
OK. Thats one scenario. Lets sit back for six months and see what happens.

glastowinebar

Running_Horse wrote: »

Have you ever considered the chances against your ever having been born at all? If just one of your thousands of ancestors had acted just a little differently? Now that's frightening.

....Or if you hadn't won the swimming race against the millions of other competitors....;)

ManAtHome

danm wrote: »

my point was that the 'toxic waste' securities are not those issued by UK banks. it is not our housing market that is causing the RMBS market defaults. Its the US

And my point was that it's not where they came from, it's who's been buying them - or is the "UK Market" entirely about domestic property loans these days..?

WTF?_2

danm wrote: »

my point was that the 'toxic waste' securities are not those issued by UK banks. it is not our housing market that is causing the RMBS market defaults. Its the US

Yes - but European (inc UK) banks were more than willing to invest heavily in securities based on US Mortgage debt. The dangers of slicing and dicing such debt have long been known and this crisis was predicted long before it happened.

Accordingly, trying to blame it all on the US and painting our banks as innocent victims is not really telling the whole story. Those who should have known better in the UK financial system are fully complicit in this mess too.


And once the UK/European house price crisis hits, then the 'fun' is really going to start as precisely the same sort of financial sleight of hand was employed by companies such as Northern Rock in order to enable them to lend, lend, lend :eek: