Friday, Nov 23, 2007
Say goodbye to your tax money
Guardian: Revealed: massive hole in Northern Rock's assets
A Guardian investigation of Northern Rock's books has found that £53bn of mortgages (over 70% of its mortgage assets) is not owned by the beleaguered bank, but by a separate offshore company.
It means the pool of assets available to provide collateral for Northern Rock's creditors, including the BoE, is dramatically reduced, calling into question government claims that taxpayers' money is safe.
Posted by little professor @ 05:38 AM (1291 views) Add Comment
14 Comments
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1. little professor said...
Among the findings are:
· Mortgage loans of over 90% of the purchase price of a house have soared to £16bn, from £2.7bn, in the space of three years.
· Loans have exceeded the value of the property on nearly 2,500 mortgages, with a value of £263m. Three years ago, the figure was just £13m on 158 properties.
· 10,000 Northern Rock customers are a month or more in arrears on their mortgages, on loans worth nearly £1.2bn. At the end of 2003, there were only 2,500 in the same difficulties, with mortgages worth £168.8m.
· In 2003 Northern Rock repossessed 80 properties. Last year more than 1,000 properties were repossessed. By the end of September this year 912 properties had already been repossessed.
A rising loan to value ratio leaves Northern Rock exposed to any slump in house prices. Any property market crash would also have an impact on the company's arrears position.
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3. Stevie Dee said...
Stop doing a Gordon Brown, and get the facts out man...
4. handle_it said...
This shouldn't really come as too much of a surprise.The scale of the crisis seems to increase on a daily basis. How much LTV over 100% do they have ? Seems to me that in even best case scenario the UK tax is going to get shafted... I'm sorry but someone needs lose their job for this and I'm not talking about at the NR..
5. techieman said...
see also: http://www.guardian.co.uk/business/2007/nov/23/northernrock.creditcrunch -
As Little prof says :"By September this year, the value of mortgages with a loan-to-value ratio in excess of 90% had soared to £16bn. Almost 2,500 mortgages, with a value of £263m, were in excess of the value of the property.
Three years ago the average loan-to-value ratio was 75.43%. The average ratio today stands at 77.44%." Also
Northern Rock's expansion meant that by this year it was taking a fifth of the British market in new home loans. In doing so the bank's loan-to-value ratio increased, which means borrowers have smaller slices of equity, and arrears have risen dramatically in the past five years."
What we need to know is which building society / bank LOST share and has the lowest average LTV ratio, - and is not involved in CDOs, Sub -prime etc. - Wishful thinking? As ever though it would be seen as more stupid to not follow a market going up than it is to anticipate it going down. When the bear comes its "the market" thats to blame - whereas if the market goes up and you are underweighted thats YOUR fault. Sound familiar - probably exactly the same point as what "the herd" tells you "you are stupid - house prices always go up etc etc." Still he who last laughs laughs longest - now where did i put that ingot of gold........?
6. Collywolly said...
Looks like the UK does have a lot of subprime to me!
7. inbreda said...
As a channel islander who cannot stand the finance industry that rules the channel islands as a result of our tax haven status can I just point out that any englander who does not oppose the existence of tax havens deserves to be penniless.
These trust funds and offshore registered companies and unregulated hedge funds that exist in offshore tax havens are milking teh UK tax payer dry. Why does nobody do anything about this?
I have my fingers crossed that if every tax payer in england loses £900 over the NR affair because all the assets have been offshored there will be a massive groundswell of opinion that will close down these immoral tax havens once and for all. Bring it on - I would like my island back as it was.
8. planning4acrash said...
Good point. It would be a twist of fate if the NR fiasco was actually a politically expedient way of breaking the finance industry and pushing forward new legislation. I'd like to thing that the actions of our chancellor were so calculating, but somehow I doubt it!!
9. inbreda said...
planning4acrash - I know it is tempting but you really shouldn't judge a book by its cover. Just because the Chancellor looks simple, as he bumbles from one catastrophe to another, doesn't mean that he is in reality an idiot.
Admittedly though it does increase the chances quite significantly.
10. dohousescrashinthewoods said...
I fully blame the man who built the bomb, lit the fuse and instructed his most loyal follower to sit on it and stop it exploding.
Darling has taken massive volumes of vitriol for a deluge of issues that are fundamentally and gallingly not his fault.
I actually think that takes character.
11. voiceofreason said...
inbreda @7, and don't forget us Devon and Cornwall natives .... experiencing a similar problem.
12. mrmickey said...
This government appears to be in permanent crisis management mode. If they hadn't bailed out NR who knows what might have happened the panic could have spread to other banks and NR would have gone bust. As things stand NR appears to be going bust anyway and the tax payers money is going to vaporise, the question is which bank is the next to require government bail outs. Next Sterling will crack as investors realise the country is being run like a corrupt South American Junta, £4 a loaf of bread anyone.
13. shipbuilder said...
The finance industry is now the only thing keeping the UK economy afloat, apart from whatever other influences it may have over the government - there is no question of Gordon threatening it in any way.The only thing that will get real change happening in the financial industry is the public - there is certainly no chance of the media making it an issue.
There needs to be an independent groundswell of opinion and protest - unfortunately it seems that the French are the only people with the balls for it these days. No matter what disaster occurs, people will not want to deviate from the current system.
The nature of our society these days is that disaster is handled with further layers of comforting capitalism and spin.
14. _woody said...
Glad the Treasury aren't looking after my investments. The money they been losing is staggering.
Pressure from the treasury promped the sale of qinetiq for a knock-down pice of 42m. Its now valued at 372m with some of its pivate equity bosses seeing their investment rise 19,990%. Oh, and of course who can forget that half our gold reserves were sold at the bottom of the market. Gold is now soaring in value.
And now the Northern Rock debacle! Another £20 billion (the entire primary school budget) squandered. Can't see much return.