Wednesday, April 15, 2009
Ratings actions based on stress-testing a peak to trough decline in house prices of 40%
Moody's downgrades top building societies
Ratings agency Moody's has slashed its credit ratings on a number of building societies after warning of further losses to come as people struggle to pay their mortgages. Moody's has downgraded a total of 16 building societies, including groups such as Abbey National, Alliance & Leicester and Nationwide, in anticipation of further pain to come in the UK housing market as a result of the global economic crisis. It has cut both its Bank Financial Strength Rating's (BFSR) on all the firms, as well as reducing some of its senior debt and deposit ratings.
Posted by jack c @ 02:55 PM (1284 views)
11 thoughts on “Ratings actions based on stress-testing a peak to trough decline in house prices of 40%”
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Will says:
Abbey National is a bank, and has been for some time, and like Alliance and Leicester is part of Santander Banking group. Onlt Nationwide is a true Building Society.
amjidk says:
Another 40% seems about right..
drewster says:
If they’ve been downgraded, presumably they’ll be less able to access wholesale funding; and hence less able to dish out mortgages.
Fewer mortgages = lower house prices.
How long before Moody’s downgrades Great Britain Plc?
paul says:
Bbbut … the green shoots … recovery in the housing market … estate agents assured us that ….
51ck-6-51x says:
amjidk said, “Another 40% seems about right..” –
Sure, however Moody’s stress test was for a 40% fall from peak (and I’m sure there needs to be an associated timescale, but nothing said about that anywhere as far as I can tell).
refusetobuy says:
Moodys stress-testing puts house prices at 120,000. March 02 levels.
Doesn’t seem very stressed to me.
britishblue says:
Refuse to Buy @5….. 2002 was the year that house prices really rocketed. I think it was around 21% in one year. So this is probably a middle of the road judgment from Moody’s who can’t be seen to be too negative and wont factor in the overshoot. From memory 2002 was also the year that everyone started saying house prices were getting to high again. However, many of these people quietly forgot about that and hence the boom.
Sybil13 says:
take a look at the version of this at:
http://www.ft.com/cms/s/0/e30e0940-29f7-11de-9d01-00144feabdc0.html
Says:Moody’s said it had changed its assumptions about UK house prices in the past few months. It also stress-tested the mutuals’ commercial loan portfolios, where it expects the performance to worsen during the next few years.
Marjan Riggi of Moody’s said: “What’s different is the loss expectation is higher than it was three or four months ago looking at the economic forecasts on housing.
“Last year we were looking at mortgage lenders and stress-testing a 25 per cent fall in house prices. In the past three or four months that assumption has changed to a 40 per cent fall, which is a considerable difference.”
On Wednesday Adrian Coles, director-general of the Building Societies Association, said Moody’s had included an extreme stress test of a 60 per cent fall in house prices, even though the Nationwide house price index has only seen a 18.9 per cent fall in prices from October 2007 until now
quiet guy says:
I’m scratching my head tonight wondering what to make of this. Moody’s have really put the boot into some Building Societies that have stood up to the credit crunch much better then their bigger banking counterparts.
A detailed summary of all the rating changed can be found here:
https://www.theasianbanker.com/A556C5/Update.nsf/0/C4E6181E356012914825759900091179?Opendocument
inflation is eating my savings says:
At the last reckoning, these ratings agencies were not to be trusted.
enuii says:
Remember the ‘Star of Zanzibar’ that was propping one midlands construction company up.
Some accountants are the most accomplished liars after solicitors so where does that leave trust, as ever everything is corporately fine until you discover that the emperor has no clothes.