Friday, Jul 28, 2006

Despite tighter lending criteria bad debts at Alliance and Leicester rise 60% in the last six months

Telegraph: Personal insolvencies prompt A&L to rein in lending

A&L is now accepting a "lower level of new business" to ensure "high credit quality standards" are maintained.

Posted by denzil @ 01:53 PM (643 views)
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1. Poppy10 said...

Well, could this be the first signs that irresponsible lending by the banks is coming back to haunt them?

Friday, July 28, 2006 02:12PM Report Comment

2. inbreda said...

Thankyou Denzil - this is BIG BIG BIG news.

With bad debts up 60%, they will have to rein in lending VERY sharp to compensate. They have been lending to the same type of individuals for many years - the type that now seem to be turning bad. To get back to where they were, they'll have to avoid lending to 66% of the people who would go bad. And they would have to do this for the same period that they have been lending on the previous criteria - i.e. YEARS!! To have any noticable effect in the next year or so, they will have to avoid nearly ALL bad debtors - and their figures STILL won't look great. It is this leveraging that means they will have to take a HUGE knock on their accept rates, perhaps from 50 to 70% to 35-50 ?? It's going to hurt. Lots.

And this will become a vicious circle. The more they constrain lending, the more the desperados will be unable to borrow their way out of trouble, thus leading to MORE insolvencies. This will impact on other lenders as well as forcing A&L to restrict their lending criteria even further.

I really do feel that this is the beginning of the end. The start of the viscious circle that will lead to repossessions, forced sales and ultimately HPC.

Friday, July 28, 2006 02:57PM Report Comment

3. kpjcomp said...

Were I live (North East - Hull area) house prices are allready starting to drop.

I always pick up the property guide from our local rag. and on the back page -> lots of New Price / Reduced for Quick sales tags appearing.
I had allready notised recently that house's in the 250+ mark were dropping, but now the 160+ appear to be getting hit.

Down our street there has been 2 - 4 bed detached houses for sale for ages, and both are empty. One of them had the SOLD sign a couple of week ago, and suddenly this morning I notised it's back on the market. So I wonder if the Lending companies have allready started to get strict?, but have not said anything for fear of upsetting the market.

Is it just me? or does it feel like things are starting to move fast. Spin is getting to the stage of "Sunday Sport headlines", News about how much our country is in dept practically every day. IVA's etc hitting the roof.

Friday, July 28, 2006 03:20PM Report Comment

4. uncle tom said...

We have this dizzy complacency about lending that maintains that if not too many people are throwing in the towel, then everything's OK.

Trouble is that as long as people can get more credit, they won't rush to throw the towel in, but when the lenders finally get cold feet and turn off the tap, there will be a deluge of bankruptcies.

An aside to this is that the first lenders to call time will lose relatively little, while those who delay will get crucified. As bankers are herd animals, this could be a rapidly evolving story.

Friday, July 28, 2006 03:28PM Report Comment

5. markd said...

I've also noticed over the last three weeks lots of "new" and "reduced" properties in the local paper -one prominently advertised property that I know has been significantly upgraded by the owners and had been on the market for months down from over 294,000 to under 250,000. Haven't seen that happening for a few years!

Friday, July 28, 2006 03:47PM Report Comment

6. denzil said...

I'm starting to see the price reductions again too.

Friday, July 28, 2006 04:03PM Report Comment

7. Retiredbanker said...

My daughter who lives in a university town in the East Midlands has been trying to sell her btl property for
nearly a year, and having reduced the price in stages from 120k to 105k, is at last getting offers in the
95k range.
She has changed EA's several times, and the original selling price was considered to be realistic at the time.

Friday, July 28, 2006 04:37PM Report Comment

8. The Capitalist said...

I urge you all to go and get this week's edition of Money Week - the ever-sensible James Ferguson has done a very interesting piece on why the HPC hasn't yet got under way, but is inevitable. And why? Debt and the end of cheap money. Our economy is run by a socialist who has spent all our money on creating (largely) non-jobs.

Friday, July 28, 2006 04:44PM Report Comment

9. Indiablue19 said...

Really interesting story, and so timely. My son just opened an account at A&L on Tuesday. They refused to deal with him [fulltime student with fulltime employment], unless he guaranteed to deposit 500 pounds a month or more. On Monday, Barclay's Bank, [who holds in trust our magnificent life savings and house purchase fund], had refused to open an account for him at all, although his father and I have banked with them in substantial terms for twenty five years. Two months ago, Royal Bank of Scotland [who just opened a multi-billion pound private health spa and luxury boutique complex for employees near the airport while raising every sort of charge and fee to customers] "lost" a conspicuously large cash deposit we had given them between the branch and the downtown main safe box. The money miraculously resurfaced a few weeks later with a flower bouquet and an apology on intervention from the Managing Director's office. So where's the safe bet? Is it Lloyd's TSB then? Under the mattress? Any recomendations? I'd hate to see the HPC finally materialize and our house fund evaporate!

Friday, July 28, 2006 05:08PM Report Comment

10. Indiablue19 said...

You know, these banking experiences of the last few days/months imparts the sense of doing business just one step ahead of the sheriff or the eviction wagon. The sort of news all have awaited, and yet, it's just a bit creepy.

Friday, July 28, 2006 08:07PM Report Comment

11. bidin'matime said...

Id keep an eye on the credit card companies and the level of unsecured debt, which has been steady or falling recently. People in debt use more debt to meet the payments and, lately, they have been consolidating this debt by remortgaging. Ive seen a lot of it in my professional role (Im and accountant / financial advisor, although I dont touch mortgages). I am staggered by the level of debt that some people have managed to accumulate, but by the time they have run up the credit cards again, they find someone else prepared to remortgage them and off they go again. So the first impact when they can no longer remortgage will be their inability to pay off the credit cards. They will then go for the interest free or low interest balance transfer deals, then when card companies get a bit more picky they will start to default. They wont want to default on the mortgage, as this will threaten the roof over their heads, so the cards will be maxed then they will go first.

Friday, July 28, 2006 08:24PM Report Comment

12. Blindleadtheblind said...

for sure this situation will be being seen across virtually all lending institutions, which means loans will be much harder to come by in the years ahead. Add in more difficult remortgages as house prices drop and the spiral starts. Simple word is recession, albeit a mighty painfull one for most.

Saturday, July 29, 2006 08:28AM Report Comment

13. harold said...

Capitalist, I agree with you that the Ferguson article is good and a fillip for all HPC enthusiasts, however I'm not sure it's accurate to say that..."Our economy is run by a socialist who has spent all our money on creating (largely) non-jobs." I'm not defending socialism, but New Labour (including Crash Gordon) socialist? I don't think so.

Saturday, July 29, 2006 01:56PM Report Comment

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