Wednesday, Jul 21, 2010
UK banks and housing market on life support
Telegraph: British banks face £390bn 'funding gap'
British banks face a funding crunch next year as they attempt to refinance debt amounting to double the amount they raised on average during the years of the credit boom. Banks must raise about £390bn in new debt in 2011, or more than £30bn every month just to replace their existing funding as they are hit by a combination of maturing bonds and the closure of major Government-guaranteed financing schemes. Nomura analysts in a presentation yesterday, pointed to last month's Bank of England Financial Stability Report (FSR) as they warned of the funding crunch facing the UK's major banks... UK banks, which must replace debt worth just over 200pc of the average raised in the years 2005 to 2007...
Posted by mark wadsworth @ 02:41 PM (1949 views) Add Comment
11 Comments
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1. mark wadsworth said...
I'm going to "do a Simon68" and comment on my own post, but is it not quite conceivable that this will cause the "money supply" to contract; house prices to fall; and interest rates paid by banks to rise as they desperately scrabble around for money? Whether there is price inflation in other goods and services is of little practical concern to me right now.
recaptcha: wrestling society
2. hpwatcher said...
I'm going to "do a Simon68" and comment on my own post, but is it not quite conceivable that this will cause the "money supply" to contract; house prices to fall; and interest rates paid by banks to rise as they desperately scrabble around for money? Whether there is price inflation in other goods and services is of little practical concern to me right now.
Yes; the key thing is what the Govt and BOE will do. I suspect it will be QE2 - perhaps under the guise of another name.
3. cat and canary said...
"I suspect it will be QE2 - perhaps under the guise of another name." ......."titanic?" ...we'll need a titanic captain to navigate this one!
Sorry, puns over.
4. timmy t said...
This is properly frightening!! Anybody who reads this and genuinely thinks that the world cup or rain is to blame for a slowing housing market really does have their head up their backside!
5. Ndg said...
QE II supported by continuing low interest rates.
This is all going in the wrong direction.
I'd prefer: 80% employment. LVT. Average house price = 2.5 x earnings (as measured against gold). PM's heads on pointed sticks. Bankers in jail. Representative currency free to trade in a free market. Beer in fridge. Sausages on BBQ.
6. miken said...
Sounds to me that the era of cheap money is truly coming to an end.
UK mortgage rates will soon reflect international lending rates. This probably means 5%+.
In order for the bank to make money one would expect mortgage rates to start creeping up to 7%+.
7. stillthinking said...
Nothing wrong with posting on your own news article !
I am worried that QE will restart, and I am also worried that the banks won't have to go to the open market, and will require BoE to permanently fund their shortfall. I also worry that spending savers money doesn't actually increase demand.... because the savers can't buy stuff later. Demand was artificially elevated, so not possible to maintain demand at that level.
The problem for the UK is that we consume more than we produce, but there seems to be some idea that by devaluing the currency we recover. How can this work when the mechanism to devalue the currency is to continue consuming more than we produce!! As an average worker in the UK I need to consume less because I am too expensive. The government seeks to achieve a lower wage for me by consuming on my behalf ??
We need to be cheaper in real terms, NOT in nominal terms because of inflation. A good way to do this would be to increase taxation and not spend the money (ie pay down debt)... so hurry up Osbourne mate no time left.
More cart before horse.
Anyway, at least we have a heads up.
8. Notstillthinking said...
When Reagan and Kennedy slashed taxes, tax receipts soared. If taxes were 100% you'd get no tax receipts because everything would be black market. If you want to pay down debt, slash taxes, let the economy soar and tax receipts will rise. Raising tax rates is a continuation of the problem.
9. nickb said...
And may I at this point suggest an alternative rationale for the public spending cuts? They have nothing to do with 'britain living beyond its means' 'unsustainable public sector debts' and suchlike self-flaggelation, and everything to do with having more money available to bail out the banks yet further. It's them or us and no prizes for guessing which Cameron's tribe will opt for.
Nick
10. Subsidence House Insurance said...
There's noting wrong in good old fastioned values. If you can't afford it you don't have it until you can.
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