Monday, Feb 15, 2010
Here we go again - my my
Bloomberg: U.K. Mortgage Issuers in $500 Billion Funding Gap, Moody’s Says
“If other debt markets such as covered bonds cannot take up some of the funding gap left by the government schemes, the impact on the U.K mortgage market will be significant,” Moody’s analysts Jonathan Livingstone and Olga Gekht wrote.
Posted by crash n burn @ 04:15 PM (1088 views) Add Comment
9 Comments
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1. fjcruiser said...
Another reason for mortgage rates to go up!
2. mark wadsworth said...
To be fair to my Mrs, she's gradually warming to the idea of sitting out the crash. I told her about this £300 billion "funding gap" and told her the government couldn't possibly keep the bubble inflated forever, so I think she's pencilled in renting for another year after our term comes up for renewal in June.
Surely, no sane private investor is going to lend UK banks £300 billion?
3. Unbeliever said...
2014 seems like a long time away, my children will have spent most of their childhood living in rental properties. At this rate we will probably buy the family home shortly before they move out.
4. mark wadsworth said...
Further, UK banks could get that £300 billion over three years by just collecting interest and repayments on outstanding mortgages of £1,200 billion - call it 5% interest plus twenty year average repayment term, plus occasional windfall redemption when borrower wins lottery or sells to a cash buyer, plus £200 billion credit card debets they should be able to collect faster than that and also stop paying interest on deposits (I once worked this out on basis of BoE figures, and it is indeed about £100 billion gross income a year).
It means they wouldn't be able to advance a single penny in new mortgages for three years, but so what? Whoever's renting now will just have to save up a bigger deposit for when they start lending again.
5. Boss said...
I’m still sitting out this crash, but it better come soon. If I wait another 2 years for these schemes to end I'll have wasted another £24k on rent!
My brother pulled me up for being 'bitter and twisted' for missing the housing boat yesterday, but I think I've every right to be after being prudent and predicting this crash over 5 years ago, and rather than jump on the band wagon like loads of my friends and thought that borrowing x6 my salary or an interest only mortgage seemed stupid. However I did fail to predict the levels the government have stooped to prop up the housing market.
The crash hasn’t happened yet, but I’m confident it will but when!?? it better be soon before I waste any more cash on rent
6. hpwatcher said...
Surely, no sane private investor is going to lend UK banks £300 billion?
Someone will probably lend...but will they ever get their money back as the UK is effectively bust.
7. mander said...
The government programs allow banks to take mortgage-backed securities off their balance sheets by swapping the debt for Treasury notes from the government.
Tax payers to replace the derivatives if they want a house. Simples!
8. tenyearstogetmymoneyback said...
Mark wrote "Surely, no sane private investor is going to lend UK banks £300 billion?"
Offer 10% interest and I'm sure the overseas investors would be very interested (unless the loan was in Sterling)
9. mark wadsworth said...
re what Mander says, he is probably right. The history of UK tax since 1066 is that less and less has been collected from land value taxes (aka 'ground rents') and more and more in other stuff, mainly income tax and VAT.
So it was only a matter of time taxes on land values went negative (i.e. become subsidies) and income taxes and VAT get hiked even more to pay for it.
I am not joking - Labour and Tories are now boasting about Council Tax freezes (i.e. real terms reductions - keeping total receipts at about £20 billion in total) and increasing VAT receipts from £80 billion to £90 billion.
I suppose VAT is the perfect Home-Owner-Ist tax, as housing and banking is largely VAT exempt, and VAT is a stealth tax anyway, unlike Council Tax where you can see a few quid leaving your bank account every month.