Wednesday, February 21, 2007

Sub-prime lending worries begin to hit UK banks

Why the UK debt mountain isn't getting any smaller

The UK consumer’s average credit card spending fell on an annual basis for the first time ever last year, according to Euromonitor International. Meanwhile, banking giant Barclays reckons it’s over the worst of its bad debt problems. So are UK consumers finally getting to grips with our borrowing? No, says John Stepek. Credit card debt may be falling, but lenders are still borrowing elsewhere - and that includes sub-prime lending against property.

Posted by mary @ 10:26 AM (472 views)
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3 thoughts on “Sub-prime lending worries begin to hit UK banks

  • The sub-prime mortgage is an iceberg….with a 100 megaton hydrogen bomb inside.

    This behaviour by the banks is breathtaking incompetence. They claim record profits (to avoid their stock being hit), but they have not applied a stochastic measure to the “unthinkable” event. A 7-times standard deviation that apparently can never happen, yet often seems to.

    If there is a 1% chance you could lose £100bn, then you need to subtact £1bn from your posted profits just to be sure. Leverage works both ways; banks seem only able to report on their upside.

    There is no real grasp of just what the sub-prime eruption casualty figures will be.

    If oil makes fuel prices too high, more people than the models predicted will default. People forget that all these things are linked.

    US attacks Iran; WW4 kicks off; Russia cuts all fuel supplies to Western Europe; Iran blockades the Straits of Hormuz; Oil goes to $300 /barrel. Petrol here is at £3/litre (IF you can get it). Fuel bills go up 100%.

    What happens to Joe Billpayer – he is finished. And so is his mortgage. Worse still, look out for the 2.5% hike in base interest rates in a day – IN DEFENCE OF CURRENCY.

    Because this is how the UK, France and Israel were forced out of Egypt in 1956. Someone starts selling your currency, you have to raise interest rates. People will sell your currency if

    a) You have pissed off someone with a lot of your currency (e.g. China, Arab Countries)

    b) Even Mr Bean can see you are a spent 3rd rate power with no resources and no future and therefore why should they hold your (now) worthless currency unless the rate is much higher than elsewhere to compensate for the risk.

    Tony Blair and Gordon Brown have done more damage to this country ever since Hitler tacked on a Swastika to his jockstrap.

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  • Reading through this article one concludes that some UK banks will be exposed to much greater risks than others because of their reckless lending in recent years. Some in particular come to mind with their 5 x self cert products. What will the default ratio be with them when the big ‘currency defender’ rate hikes kick off? Be careful where you put your savings.

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  • @sovietUK,

    Bravo.

    Remember the phrase “IN DEFENCE OF CURRENCY” as another reader keeps saying.

    Just because your “money’s in the bank”, don’t think that will make a jot of difference. Ask an Argentinian.

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