Tuesday, Dec 08, 2009

There may be trouble ahead..........

Citywire: House price tumble could be next bombshell for banks

A double dip in the property market runs the risk of forcing banks to pump extra cash into their residential mortgage-backed securities (RMBS) portfolios to ensure investors in the asset class get paid on time. Many banks’ RMBS’s were trading as low as 20p in the pound at the height of the credit crisis, prompting a wave of opportunistic buying that has made many funds a lot of money in the subsequent recovery. However, there are fears that the residential property market could face a double dip in 2010, which would spark a fresh wave of concern among banks and investors.

Posted by jack c @ 04:13 PM (1666 views)
Add Comment
Report Article

1 Comment

1. jack c said...

Full article for those without a citywire account

A double dip in the property market runs the risk of forcing banks to pump extra cash into their residential mortgage-backed securities (RMBS) portfolios to ensure investors in the asset class get paid on time.

Many banks’ RMBS’s were trading as low as 20p in the pound at the height of the credit crisis, prompting a wave of opportunistic buying that has made many funds a lot of money in the subsequent recovery.

However, there are fears that the residential property market could face a double dip in 2010, which would spark a fresh wave of concern among banks and investors.

Andrew South, a credit analyst at Standard & Poor’s, points out that prepayment levels have plummeted markedly over the past 18 months as both refinancing and transaction volumes have plumbed historical levels.

Around 20%-30% of prepayments, where mortgages are paid off early, are down to full loan redemptions by borrowers moving house with around 50% due to borrowers refinancing.

‘If house prices undergo a ‘double dip’, ultimately leading to a 35% peak to trough correction some time in 2010, prepayments rates would remain depressed for the foreseeable future, as disproportionate numbers of borrowers struggle with low or negative equity,’ he says.

‘Even if house prices continue to recover and prepayments gradually improve in the short-term, in either scenario some mast trust structures in the UK prime RMBS sector may continue requiring additional originator support if they are to meet the scheduled maturity profiles of the issued notes.'

Delving further into the stats, it can be seen that the 12 month trailing number of property sales and year-on-year house price growth has been more than 80% over the past 18 months.

Tuesday, December 8, 2009 04:14PM Report Comment
 

Add comment

  • If you do not have an admin password leave the password field blank.
  • If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines
Username  
Admin Password
Email Address
Comments

Main Blog | Archive | Add Article | Blog Policies