BOE UK credit conditions survey Q2 2017

[Lord D'arcy Pew]

1 hour ago, hi5lo5 said:

If the deliquency rate on unsecured lending is raising. It's a matter of time for the secured lending to catch up.

For sure banks can't sell the kidney of the borrowers of unsecured lending.

When the US of A started dishing out sub-prime auto loans the thinking was they would pay off the car loans ahead of any mortgages. The twisted logic was that without a car they couldn't get to work, this would become their priority payment.

Mortgage defaults maybe the very close.

[Sawitcoming]

2 hours ago, LC1 said:

Are these % changes since previous Q?

If so, wow. 

Quote

a) Net percentage balances are calculated by weighting together the responses of those lenders who answered the question by their market shares. Positive balances indicate that lenders, on balance, reported/expected demand/credit availability/defaults to be higher than over the previous/current three-month period, or that the terms and conditions on which credit was provided became cheaper or looser respectively.

It appears to be relative to the previous quarter. Anyone else what to take a stab at interpreting this?

[scottbeard]

17 minutes ago, Sawitcoming said:

It appears to be relative to the previous quarter. Anyone else what to take a stab at interpreting this?

I believe it is calculated as {% of people who said defaults have risen} - {% of people who said default have fallen}

So the figure of 25.9 does NOT mean that a quarter of loans are defaulting, or that amounts of defaults are 25.9% higher than last quarter.

What it means is that about 63% of people are seeing defaults on the rise, with 37% seeing them falling (63 - 27 = 26).

So a clear sign of worsening conditions, albeit perhaps not quite as dramatic as it might first appear, since "defaults are on the rise" could be only a tiny increase.

[Sour Mash]

42 minutes ago, Lord D'arcy Pew said:

When the US of A started dishing out sub-prime auto loans the thinking was they would pay off the car loans ahead of any mortgages. The twisted logic was that without a car they couldn't get to work, this would become their priority payment.

Mortgage defaults maybe the very close.

And as increasing numbers of US citizens are finding out (not through choice), you can also live in your car!

 

[zugzwang]

And still the central mystery remains. Why should anyone need govt help to buy a house when the Bank Rate is 0.25%?

[Freki]

34 minutes ago, scottbeard said:

I believe it is calculated as {% of people who said defaults have risen} - {% of people who said default have fallen}

So the figure of 25.9 does NOT mean that a quarter of loans are defaulting, or that amounts of defaults are 25.9% higher than last quarter.

What it means is that about 63% of people are seeing defaults on the rise, with 37% seeing them falling (63 - 27 = 26).

So a clear sign of worsening conditions, albeit perhaps not quite as dramatic as it might first appear, since "defaults are on the rise" could be only a tiny increase.

And since it is weighted by market share, then it means an increase of 25% in default. So if it was 1% now it is 1.25%. What is impressive is the speed of the increase, it means a lot of stress for many people. JAMers are obviously first in line. 

The worst is that it comes with excellent employment figure. So something is extremely wrong in that situation. 

[Democorruptcy]

1 hour ago, durhamborn said:

Pure theft from working people to prop up house prices.Then again the young people buying them are still stuffed.If houses go down 50% and they had an equity loan of £50k they still owe the government £25k,plus their own deposit lost,plus owe the bank 30% of the original loan.Cant buy ,well,ever again really.

If the equity loan was £50k I assume you mean that's on the 20% scheme so the full purchase price was £250k? Then if prices drop 50% the sale price is £125k? Their £12.5k deposit is obviously lost but have you got a link that states they still owe the governbankment £25k for the £50k equity loan? (I'll leave the 30% to the bank for now)

[Social Justice League]

Amazing how many new cars I see driving around.

 

All bought in cash I presume........lol.

[darkmarket]

1 minute ago, Freki said:

The worst is that it comes with excellent employment figure. So something is extremely wrong in that situation. 

The deception behind the unemployment figures is really starting to show now. They're obliged to waste time debating how to reconcile these defaults with a "solid" labour market, just like with the Philips curve nobody mentions the elephant. The numbers have stopped working for the calculations that require actual unemployment figures.

[scottbeard]

31 minutes ago, Freki said:

And since it is weighted by market share, then it means an increase of 25% in default. So if it was 1% now it is 1.25%. What is impressive is the speed of the increase, it means a lot of stress for many people. JAMers are obviously first in line. 

The worst is that it comes with excellent employment figure. So something is extremely wrong in that situation. 

No I don't think it means that.  That statistic is an indication of worsening, but NOT of the magnitude of that worsening.

What it says is that 25% more of the market is seeing defaults increase than is seeing them decrease.  It does not make any comment on the actual magnitude of those defaults, so it could be a lot more or a lot less than 25%.

In a simple example let's say that there are five lenders, each with equal market share:

A, B and C report defaults have increased very slightly (let's say by 5%)
D and E report defaults have decreased very slightly (let's say by 5%)

That would produce an index reading of +20%, but the actual rate of default would only have increased by 1%.

Conversely, that statistic can never be more than +100% (everyone reports a worsening) but in practice rates of default could much more than double.

[Freki]

58 minutes ago, Democorruptcy said:

If the equity loan was £50k I assume you mean that's on the 20% scheme so the full purchase price was £250k? Then if prices drop 50% the sale price is £125k? Their £12.5k deposit is obviously lost but have you got a link that states they still owe the governbankment £25k for the £50k equity loan? (I'll leave the 30% to the bank for now)

Well basically their share is to be bought back at market value. So the government can make a profit or a loss

[henry the king]

This is amazing news. The best we have had in a long time. I think people are thinking we need a financial crash again to get a hpc. We Dont need this! In the 90s hpc occured with no financial crash. Bubbles pop all the time and it doesnt mean a financial crash. So it is fine, we can have a nice hpc without a financial crash. It is happening i think

[Ash4781]

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

as upthread and commented on by other posters there is a spike in inflation causing this deterioration. Worryingly this is without a rise in unemployment. Some households must be really stretched. Car loans next ? Rising rent arrears ? 

[Ash4781]

duplicate

Edited July 13, 2017 by Ash4781

[durhamborn]

5 hours ago, Democorruptcy said:

If the equity loan was £50k I assume you mean that's on the 20% scheme so the full purchase price was £250k? Then if prices drop 50% the sale price is £125k? Their £12.5k deposit is obviously lost but have you got a link that states they still owe the governbankment £25k for the £50k equity loan? (I'll leave the 30% to the bank for now)

The 20% equity loan is 20% of the value of the house.So if the house goes down they owe 20% of whatever its sold for.Thats at least how i think the scheme works.

[Democorruptcy]

4 minutes ago, durhamborn said:

The 20% equity loan is 20% of the value of the house.So if the house goes down they owe 20% of whatever its sold for.Thats at least how i think the scheme works.

I don't think that's how it works. 

Say house is bought for £250k with a £12.5k deposit and £50k equity loan and mortgage for £187,500. If the house is resold for £187,500 the buyer loses their deposit but walks away debt free. 

Quote

 

Selling your Help to Buy home

If you want to sell your Help to Buy home, you will need to repay the equity loan you received to purchase the property at the time you sell it (unless you have already chosen to repay the equity loan before this point). The amount you have to pay is based on the market value of your property at that time.

So, if you received a 20% equity loan to purchase your home, you will repay 20% of the value of your home at the time you sell. You must have an independent valuation carried out on the property and it should be sold on the open market at the established valuation.

If the market value of your property falls below the level at which it was first purchased, you will repay less than the original amount the Agency contributed to the purchase. As long as you have complied with all your obligations in the Help to Buy mortgage deed, you will not be required to provide for any shortfall in the equity loan if you sell when values have fallen.

http://www.helptobuynw.org.uk/help-advice/selling-your-existing-home/

 

 

 

[adarmo]

8 hours ago, Freki said:

Am I correct in thinking that the government did not disclose yet the size of the HTB scheme and how much it has on its balance sheet?

Some are due their first extra payments now.

Democorruptcy treated me to this on another thread recently. 

 

[Democorruptcy]

5 minutes ago, adarmo said:

Democorruptcy treated me to this on another thread recently. 

 

This link I posted for Freki has more detail about houses bought using the dreadful scheme

 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/621112/H2B_MGS_Official_Statistics_Publication_June_17.pdf

[adarmo]

5 hours ago, henry the king said:

This is amazing news. The best we have had in a long time. I think people are thinking we need a financial crash again to get a hpc. We Dont need this! In the 90s hpc occured with no financial crash. Bubbles pop all the time and it doesnt mean a financial crash. So it is fine, we can have a nice hpc without a financial crash. It is happening i think

Rehehehehehealllllllly?

The context of this narrative is following on the from Black Monday. 

"The recession of the early 1990s describes the period of economic downturn affecting much of the world in the late 1980s and early 1990s. The global recession came swiftly after the Black Monday of October 1987, resulting from a stock collapse of unprecedented size which saw the Dow Jones Industrial Average fall by 22.6%. This collapse, larger than the stock market crash of 1929, was handled effectively by the global economy, and the stock market began to quickly recover."

Meanwhile. in Britain

"Despite several major economies showing quarterly detraction during 1989, the British economy continued to until the third quarter of 1990. Economic growth was not re-established until early 1993, with the end of the recession being officially declared on 26 April that year, but the Conservative government which had been in power continuously since 1979 managed to achieve re-election in April 1992 after the replacement of long-serving Margaret Thatcher with John Major as prime minister in November 1990 helped fend off a strong challenge from Neil Kinnock and Labour. The early 1990s recession was officially the longest in Britain since the Great Depression some 60 years earlier. However, the recession of the early 1980s brought a sharper fall in output and an even greater rise and level of unemployment. Unemployment in Britain rose from 1.6 million to nearly 3 million between April 1990 and the beginning of 1993 (as opposed to the rise from around 1.5 million to 3.2 million that had occurred as a result of recession between 1979 and 1983), and with the return of economic growth it began to fall from early 1993 and within five years was back to pre-recession levels.

Following the end of this recession the British economy enjoyed a record run of unbroken economic growth lasting more than 15 years, until the economy lurched back into recession during 2008 – an economic downturn that was ultimately even worse than that of the early 1990s."

https://en.wikipedia.org/wiki/Early_1990s_recession

I rebut your proposal in the face of the actual facts. 

[adarmo]

32 minutes ago, Democorruptcy said:

This link I posted for Freki has more detail about houses bought using the dreadful scheme

 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/621112/H2B_MGS_Official_Statistics_Publication_June_17.pdf

Thanks

 

[bear.getting.old]

5 hours ago, Ash4781 said:

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

as upthread and commented on by other posters there is a spike in inflation causing this deterioration. Worryingly this is without a rise in unemployment. Some households must be really stretched. Car loans next ? Rising rent arrears ? 

Could be and don't forget all the jobs that are related to a booming housing market.. BTL, EA's, MEW funded purchases providing more jobs. This could be the start but I reserve judgment for later! Loss of business confidence means unemployment up.

[bear.getting.old]

3 hours ago, adarmo said:

Rehehehehehealllllllly?

The context of this narrative is following on the from Black Monday. 

"The recession of the early 1990s describes the period of economic downturn affecting much of the world in the late 1980s and early 1990s. The global recession came swiftly after the Black Monday of October 1987, resulting from a stock collapse of unprecedented size which saw the Dow Jones Industrial Average fall by 22.6%. This collapse, larger than the stock market crash of 1929, was handled effectively by the global economy, and the stock market began to quickly recover."

I rebut your proposal in the face of the actual facts. 

We all have bad memories from years ago or perhaps the poster is lucky enough not to have been born in 1990.

[FLASH_2007]

17 hours ago, Barnsey said:

http://www.bankofengland.co.uk/publications/Documents/other/monetary/ccs/2017/17q2.pdf

Oh dear.

Provident have had a shortage of collectors due to a major restructuring of going from self employed to employed. I wonder if this is having a short term impact on the figures. 

[canbuywontbuy]

8 hours ago, adarmo said:

"Despite several major economies showing quarterly detraction during 1989, the British economy continued to until the third quarter of 1990. Economic growth was not re-established until early 1993, with the end of the recession being officially declared on 26 April that year, but the Conservative government which had been in power continuously since 1979 managed to achieve re-election in April 1992 after the replacement of long-serving Margaret Thatcher with John Major as prime minister in November 1990 helped fend off a strong challenge from Neil Kinnock and Labour. The early 1990s recession was officially the longest in Britain since the Great Depression some 60 years earlier. However, the recession of the early 1980s brought a sharper fall in output and an even greater rise and level of unemployment. Unemployment in Britain rose from 1.6 million to nearly 3 million between April 1990 and the beginning of 1993 (as opposed to the rise from around 1.5 million to 3.2 million that had occurred as a result of recession between 1979 and 1983), and with the return of economic growth it began to fall from early 1993 and within five years was back to pre-recession levels.
 

There were no tax credits in those eras, no zero-hour jobs.  Take away tax credits today and you would see unemployment topping 5 million+ easily.  Most "employed" people are under-employed people.  We have low unemployment in 2017, and massive under-employment.  Of course, in the dumb-dumb world of the MSM, we only have a binary view of people either being employed or unemployed.

[Toast]

10 hours ago, Democorruptcy said:

I don't think that's how it works. 

Say house is bought for £250k with a £12.5k deposit and £50k equity loan and mortgage for £187,500. If the house is resold for £187,500 the buyer loses their deposit but walks away debt free.

This sounds surprisingly generous to the mortgagor ("homeowner"), and hinges on your reading of the phrase "shortfall in the equity loan" in the quoted paragraph: "As long as you have complied with all your obligations in the Help to Buy mortgage deed, you will not be required to provide for any shortfall in the equity loan if you sell when values have fallen."

My guess is that the "shortfall" is actually the difference between the original equity loan (of £50k) and the new, calculated value of the equity loan at 20% of the current valuation (a calculated equity loan value of £37.5k).

The relavant phrase therefore means that the borrower does not have to make up the shortfall of £50k - £37.5k = £12.5k, but is still on the hook for the new amount of £37.5k.

Can anyone give a definitive answer?