Monday, Aug 13, 2007
Mayday in the UK?
MoneyWeek: Is Britain about to slide down the subprime slope?
As the US subprime mess is spilling into Europe, in the UK banks and other lenders foreclosed 14,000 properties in the first 6 months of 2007 - a worrying 30% jump over the same period in 2006 - according to the Council of Mortgage Lenders. And the bulk of the blame is attributed to increased subprime lending. But the problems for borrowers with bad debts could get worse...
Posted by mary @ 11:56 AM (168 views) Add Comment
14 Comments
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1. Anon said...
From the same article:
".. there's virtually no chance that house prices will decline enough to give borrowers some breathing room."
Funny how people on this site like to quote so selectively.
2. denzil said...
Britain sub-prime? Who knows? But there is another cloud on the horizon and that is dropping rates. The FED are reported to be considering dropping rates. What this means is that inflation will be unchecked. If and it is a very big IF sub-prime mess gets washed upon these shores then I think the eye will be taken from inflation and put on growth and to get the good old consumer propping up growth again whilst letting inflation run amok for a time. Inflation would include wage inflation too.
This is a nightmare for STR but for the FTB it has little effect as everything inflates simultaneously.
It's a long shot I know, but I would not be shocked if the BoE cut rates if required.
3. inbreda said...
I'm sure I've seen VI reports claiming there is no subprime in UK. Must be some other reason. HIPS, maybe?
4. holding out said...
The BoE is tasked with keeping within 1% of 2% CPI. It 'aint going to acheive that by lowering rates. It would therefore need a change in it's remit. This signal alone would cause panic in the currency markets before it even had a chance to lower rates. Given that the UK economy seems to consist of the City of London, the Public Sector and Shopping a nose diving currency would be a disaster.
5. Orwell said...
David Smith now tells us that there is a Sub Prime market...
Quite how much it is 'worth' (I love that saying particularly when applied to houses) I do not know and neither does the BOE or the CML.
6. sovietuk said...
"Given that the UK economy seems to consist of the City of London, the Public Sector and Shopping a nose diving currency would be a disaster".
Well maybe there are few crumbs of industry left as well but the general statement has a degree of truth to it. The bottom line is a large section of the population are now living on borrowed time as far as their standard of living is concerned. With the nation effectively bankrupt as well with its unaffordable public sector and spending liabilities, most people can look forward to their standard of living collapsing over the next 20 years. Time to get radical.
7. japanese uncle said...
The mother of all sub-prime risks do exist in none but the UK market. And lenders have no way to grasp the extent of potential loss as there has been no officially segmented sub-prime category. What should we call 'a financial nightmare' other than this. Massive unemployment in the City and the subsequent domino-effect is inevitable in this hollow-economy totally dependent housing bubble and associated retail boom.
If the UK financial industry and relevant regulators are duly and sincerely recognizing the existence of this mother of all sub-prime blackhalls, they may be a cure. But given this super-idiotic complacency (or pretention to be complacent) among the concerned parties let alone chavs on the street, we must expect the very worst, something far worse than that in the US, as they at least have had the 'honesty and frankness' to recognize that they were doing business targeting something sub-standard, a taboo business. In the UK what they did was just pouring some cheap perfume over the worst stinking manure.
What is most criminal is the attitude of the economists and journalist who are reasonably educated, thus given all the information and knowledge available to us the common men, must by now be aware what sort of hell will be unleashed.
Just unbelievable.
8. mrmickey said...
Soviet added to your comments we now live in a dependancy culture, the days are gone when people were self reliant and proud of it. Once the economy goes belly up expect the general public to call for bail outs for home owners and more state controls and hand outs. Let's face it were heading towards a country more like the old Soviet Union and people are actually calling for this state of affairs. first you make the people dependant on you then you enslave them.
9. mybrainhurts said...
A really strange piece of journalism.
"This week, the National Housing Federation said house prices will soar by 40% over the next five years. That would vault the average house price over £300,000 ($608,250). While that makes ugly reading for Brits, it's not entirely surprising, given the lack of space and land prices at a premium. (For more on this, see: Are immigrants to blame for soaring house prices?)"
The article referred to to support the argument that prices are high because of lack of supply, actually argues strongly that supply has nothing to do with it - it is all speculation.
"But the problems for borrowers with bad debts could get worse - for two reasons. First, there's virtually no chance that house prices will decline enough to give borrowers some breathing room. Second, the Bank of England has already raised interest rates to 5.75% - and signaled that another hike to 6% is likely to follow in the coming months, as it battles inflation."
This is makes no sense - it should read "...there's virtually no chance that house prices will rise enough to give borrowers some breathing room...". Has Merryn gone away for August and left the office cat to write the paper?
10. dohousescrashinthewoods said...
mrmickey, maybe tat explains why people are so keen to embrace the state surveillance society. I find it abhorrent, yet those around me appear to want more of it. Does indeed seem a bit like the Soviet Uninon.
I remember to the UK about 20 years ago and being astounded at the number of people who were more concerned with whinging about "what the council should do" than doing anything about it. Perhaps this is the natural conclusion of this mindset?
11. Alan said...
>Japanese Uncle,
Self Certified mortgages and 2nd mortgages have been around for 4 years, my future daughter in law sold her flat to a bloke who made up his income to suit. I can get payslips or a P60 with a phone call. There are adverts fly posted in central London. Not all Self Certified lenders are aiming at the dodgy sub-prime market. But some of these lenders seem to display financial laxity in their checks.
I reckon we have a budding sub prime problem here.
12. Tickock said...
Mr. Mickey
Ref - we now live in a dependency culture, the days are gone when people were self reliant and proud of it.
Indeed, once the real value of wages have been manipulated to such lows by employers, people tend to become more 'dependent' upon state provided services
Its not as if people are working less hard than they once were as you seem to suggest, far from it in fact. The 'dependency culture' rises as more people become dependent.
This has more to do with market friendly Government than social ill and in this way the Government (or the tax payer) is simply reaping what it has sowed. (Hence the need for fantasy inflation statistics)
Low wage inflation and rising costs of living together have serious social and economic consequences, of which a growing 'dependency culture' is but one.
13. david20040_0 said...
Short answer: No
14. dugmug said...
Anon...please see comment above from Mybrainhurts. You're "quote" actually makes no sense in the context of the article and is therefore a typo, which the rest of us realised becuase we read the article properly and understand the concepts being discussed! :-)