Sunday, 25 November 2007

Bad news round-up

I hate using this old cliche but there has been a "tidal wave" of bad property market news in the last week or so.

So, for the benefit of anyone out there suffering from housing crash denial, here are a few things to meditate on this Sunday.

Mortgage approvals down 37 percent

UK housing market may have its supply problems, but " no mortgages equals no demand". In October, mortgage approvals fell off a cliff. Meanwhile, the Royal Institution of Chartered Surveyors says inquiries from new buyers have fallen for five months in a row. Or to put it another way, buyers are disappearing. This, more than anything else, will burst the bubble.

No end in sight for Northern Rock

Depositors keep withdrawing their cash, while the Bank of England keeps covering the shortfall. There are a couple of potential offers to buy on the table. However, none of these offers look that attractive. Meanwhile, 10,000 Northern Rock customers are a month or more behind on their mortgages, on loans worth nearly £1.2bn. At the end of 2003, there were only 2,500 in the same sorry position, holding mortgages worth just £168.8m.

Who owns Northern Rock's mortgages?

The Guardian had a quick look at Northern Rock's books and found that £53 bn of mortgages - over 70% of its mortgage portfolio - is not owned by the beleaguered bank, but by a separate offshore company.

Paragon could be following Northern Rock

The buy-to-let financier appears to be running out of cash. It has asked its share holders to dig into their collective pockets and finance at £280 million rights issue to fund day-to-day operations. It has also been forced to sell its stock of car loans. It has also halved the amount of new lending.


One of Britain's largest sub prime operators - Kensington - has woken up to the inherent riskiness of lending to people with poor credit. It has withdrawn its range of sub prime mortgages and also made it more difficult for amateur speculators to get financing for buy-to-let. Laughably, the company blamed a lack of interest from investors for financing such worthy operations.

Bradford & Bingley

Life is getting more difficult, even for those banks who actually bother to take deposits, rather than rely on the wholesale lending market. Bradford & Bingley sold £4.4 billion of high quality assets below face value. However, the sale may only offer temporary respite. The bank may need to cover up to £5.7 billion of maturing wholesale loans in the coming three months. It is a problem that has some frighteningly similar parallels to the funding issues that brought Northern Rock down during the summer.

Alliance and Leicester

While the City of London might be a little worried about the Bradford & Bingley, it has nightmares about the Alliance & Leicester. Although the A&L has the option of selling some of its assets, the bank lacks a certain something in terms of asset quality.

Allied Irish Bank failed to find investors for a €3bn bond

This week, AIB fell foul of the credit crunch. It was unable to issue a €3bn benchmark asset-covered bond. The news sent AIB's stock down 3.2 percent. Meanwhile, Irish property prices are down almost 5 percent compared to a year ago.

ECB provides more emergency cash to the money market

On Friday night, the European Central Bank pumped in fresh emergency cash into the European banking system. The ECB didn't say how much it pumped in; the amounts will become clear in the coming days. However, it said that it pumped the money in because of “re-emerging tensions”.


Anonymous said...

A grim collection of stories.

aj said...

How the world has changed in the last couple of months. The press is consistenlty bearish and I hear more and more conversations where people discuss a future crash.

A little more credit tightening at remortage time and its all guns blazing

Chelle B. said...

Hi Alice, nice blog. I've been closely following the US housing bubble since it began.

So how long can they keep pumping this "emergency cash" into the markets? This whole global housing bubble is truly frightening and very unprecedented. I doubt many people can grasp the significance of it or just how widespread it is.

Someday, we could very well be telling our great-grand-children how we "survived the Global Crash of 20--"...

Well, on that note, it's time to practice my hunting and foraging skills! ;)

Chelle B.
The Offended Blogger

tb said...

it's funny, but even with all this news out, i don't get the feeling here in the UK that the mainstream media is getting the message across of how bad things look to be getting.

nowhere in the UK have I really seen mentioned the horrific state of the US housing market (or the Irish market), and whenever they say "credit crunch" on the BBC 10 O'clock news it seems they just use the term as a cute name for their story, not something that might actually have serious ramifications for the economy.

we'll go down faster and further than anyone is really imagining i reckon...and keep up the good work on the blog!

Anonymous said...

Hi, I have friends in the U.K. who tell me that they've heard about how the U.S. economy is rough. They seem to think though that it is only in the U.S. and not the U.K. Well, I guess we'll all find out.