Friday, April 17, 2009

Ratings agency pencils in 40% peak-to-trough house price falls

Moody’s downgrades building societies

"Nine building societies, including Nationwide, have been downgraded by Moody’s amid concerns about their exposure to falling house prices and specialist mortgage loans. The ratings agency said it had made the downgrades after stress testing how mutuals would perform against a base case scenario of a 40 per cent fall in house prices from the peak of the boom. It also stress-tested a more extreme scenario based on a 60 per cent fall." Ah well, about five years too late, but hey...

Posted by mark wadsworth @ 10:17 AM (813 views)
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4 thoughts on “Ratings agency pencils in 40% peak-to-trough house price falls

  • Obama begins publishing its stress test of American banks next week. Expect more downgrades and the end of the DJIA rally. This could precipitate the sort of changes predicted by S2R, particularly if we get another significant bankruptcy.

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  • Running a stress test has no implications of a prediction, just of a possibility – and supposedly a stress test should be of a worst-case scenario – maybe they should think about a stress test of 75% peak to trough?

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  • Given ratings agencies are in the middle of this wholecrisis and one of the major causes, does anyone actually believe a word they say anymore ?

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  • What I found interesting about the report in the FT’s about Moodys was that Moodys said the “assumption now was 40% falls”. CEBR have also predicted 40% falls if mortgage approvals don’t double soon, and if they do 35% falls. There are more estimates of 35 – 40% falls than there are of property prices rising yet still the whole country seems to be in denial. It will be intersting to see how BS’s respond to Moodys. Moody’s said it was up to lenders to now prove them wrong. So what does that mean, sensible lending from here on + better deals to attract savers?

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