Wednesday, 15 July 2009

Can they do it?

It is going to take a mighty pile of debt to cover this year's fiscal deficit. The debt management office has a sales target of ₤220 billion. So far this year, the DMO has sold ₤57 billion.

Can they do it? Its a big ask. Even if they succeed, they have to the same next fiscal year.


Berty said...

EXACTLY!!!!! Sing it from the roof tops Alice, this could get ugly for UK PLC. We are not the USA. People won't flock to us in times of crisis. We don't have a reserve currency.

If your question "will they do it", is answered with a 'no', we will have more in common with Iceland than the USA.

Phill Tomlinson said...

Central Banks will buy it. So they will always be able to sell the debt to themselves.

DBC Reed said...

I thought the point of quantitative easing was that the Guv bought the stuff back using ex nihilo money.

electro-kevin said...

OT. Ajay says:

Can you believe it? Well yes I can! I did not think they would come back as soon and from such a large lender but they are back.

The lender: Nationwide

The borrower: existing customers

Now Nationwide are a massive lender to the UK property market. They employ analysts to study the state of the UK property market as they have literally billions riding on it.

So what do Nationwide think? Well they think the UK property market is:

1. suitable for lending purposes

2. suitable to lend at greater than 100% of the value of the property

If you were ever looking for a clue or a hint that UK property is okay then this is it!

Nationwide have obviously examined the risk and have come to the conclusion that they can lend 125% of a property’s value today and not put the bank in any financially weaker position. This is because Nationwide believe one thing and one thing only:

Prices are going to rise fast

Now if I were to read between the lines I would perform the basic calculation:

Building Society LTV 125%

Normal Risk LTV 90%

Differential 35%

35/90 = 39%

So Nationwide think property prices are going to rise 39%!!!

Now this is a very very crude calculation however it seems that the Nationwide at least think their money is safe lending £125,000 on a property valued today at £100,000. This is very brave.

Now I know one thing. They would not have made this decision lightly. They know something that we don’t. I reckon more lenders will start coming out with 100% mortgages. It was just Nationwide who had the balls to do it first (and in style in my opinion going the full distance with 125%!).

So expect to see 100% mortgages for existing customers and soon, sooner than you think a 100% mortgage for brand new customers i.e. first time buyers.

These lenders do not care about upsetting the government. They could not care. They will do whatever it takes to take market share and provide a return for their shareholders. Mercenary but true. Would you expect anything else from a company that you owned some shares in?

We are in a drought however finance is out there. This presents a massive opportunity for the bargain hunter. Is that you? If so we can help you find those bargains and help you buy those properties no money in. Contact us and we will tell you how you can be a member of the Ahuja Group.

Anonymous said...

Whilst I do not approve of the Nationwide 125% mortgage offer,it will only apply to a small number of exisitng customers in negative equity, who want to move, and will only apply to a limited number of customers. It is also very expensive, and therefore a niche market.

In other words, the mortgage famine continues in a time of serious national rising unemployment, in the worst financial crisis for most people's lifetime.

mike said...

Nice graph Alice. Perhaps the government will print the remainder of the money that they require.

EK, Nationwide are only lending 125% to existing customers and only those who want to move house, i.e not to btl investors. That's not very many people and not enough to support house prices!

Just face it, the house prices have still a long way to fall.

BTW I plan to withdraw most of my money from NW. In my opinion they currently offer pathetic interest rates. A&L is the best bet currently.

Anonymous said...

previous comment was compleatly mad.
banks lent stupid amounts of money for houses a few years back if u remember and would have gone bust if it were not for the muggins tax payer.
thats y there doing it again. why should they care if all the loans go bad. they still get there bonuses and a tax payer bail out to boot!

Anonymous said...

Gotta love this quote: "Nationwide think property prices are going to [not drop by 50%]... Contact us and we will tell you how you can be a member of the [...] Group."

Ahem. Indeed! :-)

What hilariously awful spam. Some sucker will fall for it, sadly. OR should that be GLADLY?

Natural selection. I welcome it.

electro-kevin said...

I'm sure that Ajay is motivated atruistically.


Anonymous said...


Your skill distilling data into charts never ceases to amaze me.

Really, superb stuff. Great blog.

The chart itself is rather bleak...but using the straight line from some plastic packaging held against the screen, they would seem to have raised the money by January next year.