Saturday, April 5, 2008

Things are looking distinctly Rocky…

Northern Rock | What Lies Beneath

"The nationalised bank's mortgage book looks less than healthy. Whereas many of its rivals were slowing their lending and looking for safer customers [in 2007], Northern Rock had put the accelerator down and was taking on ever-riskier clients. The value of loans on its books worth 95% or more of the property's value almost doubled; indeed, those worth more than 100% quadrupled [including the infamous 125% "Together" mortgage]. Northern Rock's rush to write risky mortgages also embraced the buy-to-let market. But the buy-to-let market may be especially vulnerable to a downturn. Estate agents reckon that many landlords are letting out properties at a loss and that the value of newly built flats is plummeting. More worrying still, NR's repossession of homes is three times the average."

Posted by drewster @ 11:07 PM (595 views)
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6 thoughts on “Things are looking distinctly Rocky…

  • The UK portion of this problem hasn’t even got out of the starting blocks.

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  • Let’s be clear – the NR decision to reduce its mortgage book by 60% is a not-very-well-disguised admission that they feel their mortgage book is 60% dodgy -they will clearly want to keep the safest loans to themselves. I cannot see any other institutions touching NR customers with a 10-foot bargepole, and I believe we will see most NR remotgagees going onto the SVR, with a good proportion heading for repossession. What a hard way to learn about the importance of making calculated financial decisions.

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  • I hope that the European Commission does rule against the UK government that this nationalisation breached competition rules. Darling will then get his comeuppance in Parliament again.

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  • By reducing their mortgage book, they’ll lose their good business while retaining the toxic stuff…

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  • One thing I am not clear about;

    In America the mortgage lenders were supposed to mitigate (palm off) their risky loans to other banks using SIVs – did this not happen in the U.K.?

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  • Yep, because nobody else will take on the toxic stuff. Shooting themselves in the foot really.

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