Wednesday, 30 April 2008

Time to make a stand

i should have done some work today, but I couldn't help myself

I'll have to be at my desk early tomorrow to make up for the last 4 hours of mucking around.

A bit of fun with Fionnuala

Just for fun

House prices can fall?

Sky news cannot believe it

Tuesday, 29 April 2008

Abbey lending clarified

So after Abbey's announcement on the tightening of IO mortgage criteria

I thought I best run through some scenarios with them.

As usual it takes forever to get through on their phone system and the person you speak to rarely can answer any questions, however after around half an hour on an 0870 number I think I am there.

case 1 - if you have an existing interest only Abbey mortgage with no investment plan to repay the loan (madness) then Abbey will let you take a new deal and will not restrict you to the 50% LTV they announced.

Now Abbey will not actually check if you have an investment plan in place, they will trust that you do. So in fact, if you are willing to lie. you can say you have an investment plan and will be subject to a 75% LTV limit not 50% LTV.

case 2 - if you have a repayment mortgage and bought at 90% LTV and your deal ends, apparently Abbey have an internal system for determining your property value. So if they value your property at less than you bought it for, you are likely to be at 95%/100% or more. There will be no deals available for you and you will only be offered the standard variable rate which I believe is 7.84%.

Personally I cannot believe that Abbey would not have some sort of deal available if you were an existing borrower, but not according to their retention team.

Monday, 28 April 2008

Gordon blames America

My favourite - an interview with the PM

Abbey ahead of the game

Abbey have just announced that they are restricting the Loan to value (LTV) allowable on Interest only mortgages as follows

Without a repayment vehicle will be 50%

With a repayment vehicle will be 75%

This is a huge credit tightening. As has been discussed before this housing bubble was created because lenders increased the amount they would lend, did not check the incomes and did not require a repayment plan.

Now Abbey are saying if you do not have a repayment plan, you can only borrow 50%.

I'll explain the interest only part of this as follows.

A mortgage is either arranged on a repayment basis where the mortgage is gradually repaid or interest only which requires an investment plan to repay the loan in the future.

So interest only has lower monthly payments if you do not factor in the investment plan monthly payments.

Hundreds of thousands of first time buyers opted for interest only mortgages as they could not afford the monthly payments on a repayment mortgage, but they did not take out an investment plan.

So Abbey have at last decided that this is a risk to their business and have effectively ruled themselves out of the market for non repayment mortgages.

Calls for more regulation

There are some that call for more regulation and taxes to control the housing market.

We do not need more laws or taxes, the market needs to operate in a free market way.

But the regulator and government need to regulate and govern. Everything is now spun that there is no bad news but spinning does not work when things start to happen.

When lenders adjusted their lending criteria from the 2.5 joint income which has been around for decades, the regulator should have stepped in and queried their reasons.

When lenders stopped requiring sight of a mortgage repayment plan the lender should have stepped in.

When lenders stopped checking incomes the lender should have stepped in.

You see the regulator is hopeless and HPI suited the government as every crticism could be met with a rebuttal that the homeowing population were feeling wealthier.

There was only one reason for this boom and it was the uncontrolled relaxation of credit which allowed buy to let to go mainstream and lending levels to go from 2.5 joint to at least 4.25 joint.

Now lenders are restricting access to capital back to what it used to be and the government cry foul.

Sorry Gordon it does not work that way.


Land registry today 11.00

Month on Month -0.2%
Year on Year +4%

So the real yearly growth will be flat.

seasonally adjusted sales volume at 70,000 (yes somebody is still buying!)

New negative areas

Wales to be year on year negative
North Tyneside to go year on year negative

This data reflects sales from around 1 to 3 months ago, that reflects offers for properties made maybe 6 months ago. This data will not reflect the dramatic cooling housing market in the last 2 months.

House prices are now lower

So the latest Hometrack survey shows house prices lower than a year ago. This survey also showed a yearly negative figure during 2005 as the market slowed.

The real show this week is from the figures from Land Registry today, although these figures reflect properties that were under offer up to 6 months ago.

Nationwide data is out on the 29th and will most certainly show a negative month with a first negative year since 1992.

And the bank of england data is also out tomorrow which will show the scale of the collapse in lending.

Friday, 25 April 2008

10p hits home

My wife has had her first payslip of the tax year and her take home pay has dropped from £835 to £818 this month.

Not a huge problem as my wages are higher, but £20 less to spend this month. I doubt any of the measures announced to be looked at will compensate us.

The only good thing to come out of this is that she has not decided not to vote Labour again. As a life long Labour voter I guess this is a big decision.

Her reasoning is this

This was a deliberate tax rise on the lowest paid to pay for tax cuts for the higher paid.

The tax rise is still going ahead as Labour cobble some bizarre benefit together some time this year.

Gordon Brown must have known what he was doing and has lied to the Labour party and the people.

Sadly for me, after further discussion, her decision not to Labour again now has a caveat attached that this only applies while Gordon Brown leads them.

Labour 10p shambles

After watching Mrs Balls' car crash on Wednesday night's Newsnight I can feel this Gordon Brown U turn falling apart.

Firstly as far as I can see Gordon was pressing ahead with this even though he had been warned that millions of lower paid would suffer.

He only backed down when he was faced with a back bench revolt. So the U turn was not because he was doing the right thing for the people but because he did not want to face defeat.

Mrs Balls seemed to confirm that not all benefits will be backdated which is not what Frank Field was told.

So now we end up with the crazy situation where the lowest paid will still be taxed more, to claim some of the extra tax back they will have to fill in a claim form.

This is not even mentioning that increasing the minimum wage for some of those affected is paid by employers and not the government. The government will no doubt turn it into a debate about how much the minimum wage should be, but getting business to pay for government mistakes is a shambles.

Wednesday, 23 April 2008

Brown bottles it again

So Brown has caved in to backbench pressure and has announced measures to be looked at to compensate those that have lost out with the abolition of the 10p band.

Let's be clear - he has not done this because the lower paid will be worse off but because so many Labour MPs were going to rebel.

So what we have now is a system where the lowest paid will pay more tax and then have to claim some of this tax back in government hand outs if the government decide to give it back.


March mortgage lending plummets

This time of year we normally expect a spring bounce in housing transactions and mortgage approvals.

A year on year fall of 46% on mortgages approved for house purchase to 35417 leaves mortgage approvals at the lowest amount since the early 90s.

It seems the housing slump will now deepen with house prices predicted to fall significantly this year.

Bad news?

Not if you are a first time buyer, priced out of the market.
Not if you are trying to move up the housing ladder as the £ gap in prices drops.
Not if you can afford your mortgage payments.

Yes if you bought in the last few years and are struggling with your mortgage payments. Hopefully the Government can stop dithering and sort out a package with the banks to stop you being repossessed.

Yes if you have speculated by buying up property and letting it out. Taking property away from first time buyers and pushing up property demand is a scandal. Serves you right!!

Homeowners to get support

The government have said that homeowners will get support to make sure they are not repossessed.

Handily enough they have not mentioned what sort of support.

After nationalising Northern Rock and nationalising the bank's bad debts I would not bet against them nationalising our houses.

Maybe doubling the tax on the lowest paid was not the best place to start.

Tuesday, 22 April 2008

Darling pushes banks on payments

One of the key factors with this Labour Government is the unintended consequences of their actions.

The 10p fiasco is a classic case, they did not want to double tax for the lowest paid, but it happened because Gordon Brown lied to his own MPs.

Now this example on mortgages is another classic

Darling and that dimwit Flint are calling on banks to be more lenient on homeowners who fall behind on their payments.

Fine - OK so the banks let them have more of a holiday or roll the interest up, but whatever it is the banks lose money or defer getting their money for a bit longer.

So if this is to be the pressure put on banks, what will they do when they consider new loans.

They will have to consider that they will not be able to repossess people who are not paying their mortgages, but they will have to allow the borrower to have a payment holiday.

This means that they will tighten up their criteria even further and make extra sure on the affordability of the loan to the borrower.

So this central diktat will have the effect of tightening lending criteria making it harder for people to take out new borrowing.

Darling meets the Banks

So Darling is lining up the banks for a chat today.

I predict that he will be given some home truths. The banks will likely take the £50 billion on offer and use it to shore up their finances rather than reduce their lending rates.

I will be amazed if the lenders relax their lending criteria. They were warned years ago by the BOE and the regulator that they were allowing people to borrow too much. They did nothing, made huge profits, forced the housing market into a bubble and left people in debt up to their necks.

Now the banks are lending more sensibly, Darling thinks there is a lending crisis. Maybe Darling and Gordon Brown should have acted 6 years ago and called the lenders in to query their relaxed lending criteria. But that would not have helped Gordon's debt fuelled boom.

No more Boom and Bust. Now it's Bubble and Pop.

Monday, 21 April 2008

Credit tightening

TMW ( The Mortgage Works) continues to tighten criteria today.

Self Cert loans now restricted to 75% LTV

Self Cert now only for self employed

Self Cert now only on a repayment basis

Now - I'm trying to think back to when I last saw criteria like this - must have been 1997 ish.

As a bit of a history lesson - this criteria was how self cert started out. Then lenders got greedy and let the LTV go up to 90%, allowed employed people and allowed interest only mortgages.

Self cert (self certification) was really designed for self employed applicants, because the net profit has little correlation with the actual business drawings.

These self cert loans were exploited by employed and self employed borrowers, lying about their income to obtain a higher loan. Borrowing on an interest only basis to keep the payments affordable.

Good to see normal service resuming from some lenders.

Bank of England lender bail out

So the BOE deal has been announced this morning.

On face value it looks OK. Banks retain exposure to mortgage losses, but get a cash injection now.

It will hopefully lower mortgage rates to some degree, but it will do nothing for lender's risk lending profile.

Take a moment to think of the many hundreds of thousands of borrowers with a bad credit history who were encouraged to take a sub prime mortgage to buy a property.

These sub prime mortgages have vanished in the last few months and any of these borrowers coming off deals, will not be able to refinance them on any kind of deal. They will find themselves paying their lenders standard variable rate which will be around the 8% figure.

This represents a huge increase on the 5% fixed rates they were being offered a couple of years ago.

Rightmove April data shows a 0.1% fall in asking prices

Rightmove data out today -

The data shows the first April fall ever recorded by Rightmove.

Let's not forget this is also asking prices and not prices paid which will be shown in Nationwide's data next week and the Halifax data the week after.

Prices paid are a further 5%-15% below these figures.

There are many more months of negative data ahead.

Sunday, 20 April 2008

Gordon Brown Sky News Transcript missing

I have been waiting for the transcript of his delusional interview last week to appear, but although the archive has been updated with today's interviews, Brown's interview is sadly missing.

I was looking forward to picking it to pieces.

Oh well

John McDonnell sticks in the knife

John McDonnell sticks in the knife in an interview on The Sunday Programme.

One of the usual suspects, but one with a backbone and principles.

He is absolutely correct, the Labour Party should have had the debate last year, they would have found Gordon Brown out for the loser he is and chosen a leader who can lead.

Vince Cable talks sense again

VC has been ahead of the game on the housing bubble. In March 2007 he was on The Sunday Programme talking housing bubbles and here he is again.

Saturday, 19 April 2008

The quadruple whammy for mortgage lending

1 - the credit crunch (the money man)
2 - The FSA (the regulator)
3 - The FOS (The ombudsman)
4 - TCF (The principle)

Let me explain.

1 - The credit crunch has sucked money out of the markets, we all know this. The Treasury is in the process of seemingly nationalising the bank's mortgage debt to free up cash for lending but this will not work because of this -

2 - The regulator has recently stated that they have 3 concerned areas for mortgage advice, high loan-to-value ratios (90%+); high loan-to-income multiples (3.5x); and terms over 25 years.

3 - The ombudsman has picked up on this and made a statement regarding future complaints. Now the ombudsman has said that these areas do not constitute a complaint, but it flags this up as an area for concern.

4 - TCF or Treating Customers Fairly. TCF is a key principle and a practice any business should follow. However in the last year the regulator has majored on this as part of it's principles based regime. Basically TCF can be used to say to any mortgage adviser or lender - 'You have not treated your customer fairly by allowing such borrowing. You should compensate your customer' all done with hindsight. TCF is basically a principle that can be used to solve any of the regulator's problems, when they get around to noticing the problems.

So the withdrawal of 100% mortgages and the tightening of credit criteria is not to do with the credit crunch, but more to do with TCF in a falling housing market. Lenders know that they have lent too much money on a falling asset without checking incomes and are fearful of being hung out to dry.

We have now got to a point where it does not matter how much money is put into the market, the credit tightening will not relax.

And let us not forget that most of the credit tightening is only tightening the relaxed credit conditions of the last 6 years.

Rightmove April data shows london falls

As we all know Rightmove data is notoriously volatile as it is not seasonally or mix adjusted. Rightmove also only take into account newly listed property on their website.

It is highly unusual to see falls in April as the report says and if the figures had been seasonally adjusted, then the figure would have been significantly lower.

More pain for the housing market ahead then, however those looking to get on the property ladder will be feeling happier.

Word of advice to first time buyers - save, keep your credit clean and wait. There are significant falls to come.

Thursday, 17 April 2008

Found - a Labour MP with some principles

Angela Smith is reported to be resigning in protest at Gordon Brown's tax rise on the lowest paid.

Funny that the vote on this legislation was last year - I wonder if she voted for the tax rise then?

Anyway at least she is doing the right thing now. And she is not even in a marginal seat.

Wait for the top 100 marginal Labour MPs to find their backbones and remember who they are supposed to represent.

Edit - update - she dithered, then bottled it. She has not resigned. A rank of corporal ditherer bestowed on her by Gordon Brown.

So what are Liar Loans

A phrase often banded around

The background is this - In the market place you have your high street lenders and you have your specialist lenders. The specialist lenders tend to belong to the high street lenders (Birmingham Midshires is a sub of Bank of Scotland)

The specialist lenders will offer Self certification (self cert) mortgages. These mortgages have higher arrangement fees and rates then your high street lenders. With these mortgages the borrower fills out their income on the application form and confirms that this is correct. Ideal for self employed or employed with variable earnings like commission which most lenders will not include all of.

Self cert is wide open to abuse as the lender does not check the income. Mortgage brokers can encourage the borrower to lie about their income to obtain a higher mortgage than would normally be allowed.

Shocked? You should not be - the BBC discovered this 5 years ago.

But the high street lenders do not offer self cert mortgages so how can they be involved?

Let's take our good friend Northern Rock again. When asked in a treasury select committee if Northern Rock offered sub prime mortgages Adam Applecart said no. Technically he was correct, Northern Rock brokered sub prime deals to SPML.

But Northern Rock did offer mortgages on which they did not check incomes, could this classed as sub prime?

Most lenders have a process where loans up to 85% loan to value are fast tracked. This means that the income is not checked. Technically it is not self cert, but fast track. A prime mortgage where the income is not checked.

Northern Rock even GUARANTEED not to check the incomes in cases up to 85% LTV.

Mortgage brokers even have a trading platform on which they can see if a loan will be fast track before even submitting an application. Leaving fast track wide open to abuse.

So these loans are going to be off loaded on to the treasury (that's the tax payer to you and me).

Is this a can of worms that the regulator (yes the industry does have a regulator!) the FSA want to open?

So who to blame (we like to blame don't we) - well surely the blame must sit with government and Gordon Brown. They sat and watched millions get priced out of the housing market all the while claiming some sort of success. Of course the feeling of increased wealth that rising house prices bring helped Gordon Brown maintain his illusion of a booming economy.

Thanks go to ERIC for being the LIAR LOANS standard bearer

The treasury bails out the banks?

So there is news this morning that the Treasury is coming up with a plan to allow the Bank of England to swap Government debt for lender's mortgage debt.

As long as the tax payer does not get stuck with that dodgy mortgage debt and the bank shareholders are liable, it sounds like a good plan.

It should free up some liabilities and allow lenders to move cash more freely and offer lower rates.

But does this solve the problem of a looming house price crash.

In my opinion - No.

We are back to the last battle again. High interest rates are not going to tip the majority of borrowers into repossession.

The high price of houses is due to lenders relaxing their lending criteria to reckless levels. This is now being tightened up, resulting in less money being available for home purchase.

The battle was lost 6 years ago when the government did not question the lending practices.

How was Northern Rock allowed to lend 6 times income at 85% loan to value and guaranteeing not to check the stated income?

The battle was lost and now the rout must finish, before normal service can resume.

House prices will fall until the price/earnings ratio returns to trend. It is around 30% above trend now.

And just for a note to politicians, when lenders lend 125% of the property value (NOW GONE) or multipliers of 4.25 joint income (STILL GOING ON) or don't check incomes (STILL GOING ON)
there is a fundamental problem and you must intervene.

In the last crash lenders would lend over 100% at higher than normal multipliers, but they did at least check incomes. And we know how bad that crash was.

A diplomacy lesson for Gordon Brown

1 - Don't fall asleep
Oh Gordon.... please resign now you are just too much of an embarrassment.

Wednesday, 16 April 2008

Brown's Orange spot has a past life


In 1996, Geller asked everyone to touch an orange spot on the TV screen in order to make England win the 1996 European Football Championship. Immediately after that, they got knocked out of the competition by Germany.

The Orange DotIn a letter published in the Daily Star, on 16 September 1992, a Mrs P Standing was quoted as saying that after touching Uri Geller's magical orange spot things began to happen immediately. First, the cat knocked her favourite vase off the window sill; a pepper pot fell out of a cupboard and broke her ceramic hob. Then her iron broke.

When Gordon Brown speaks

Tuesday 15th April 2008

Gordon Brown meets mortgage lender bosses to demand that they pass on rate cuts.

Wednesday 16th April 2008

Halifax announces that they are increasing fixed and tracker rates by 0.5% for new customers.

Gordon, Gordon, Gordon... where do we start. Firstly lenders are passing on rate cuts to existing borrowers. If you are on a tracker rate then your pay rate comes down automatically, a discounted rate as the lender reduces their Standard Variable Rate your pay rate comes down and you are unaffected on a fixed rate.

Until your deal expires. Then you must renew on the higher new deals. This is where the problem lies. The lenders get their moeny in part from the money markets and the inter-bank rate remains high.

So Gordon needs to get this rate down. This is the Bank of England's area not government. More money needs to be put into the market to reduce this rate and simply not enough is being done.

Tuesday, 15 April 2008

More government spin - this time from Hutton

John Hutton today announced measures to help small businesses .....

The job of government is simple and straightforward. We have to be on your side. No ifs. No buts ...

This from the government that put up the tax rate on small business from 19% to 22%. That is hardly helping small business.

You shall be judged not by what you say, but what you do.

Brown squirms from blame again

Brown has just been interviewed on Sky News by Adam Bolton and when asked if selling gold at a record low was a mistake managed to blame the Tories!

The man is incredible.

When the economy was booming it was because of his policies not global conditions.
When the economy goes wrong and the housing market falls it is global conditions not his policies.

When he sells gold at a record low it's not his fault it's the Tories!!

If he just said - in hindsight it was the wrong time to sell, but we needed to diversify and there are a lot of things we would not do with hindsight, he would get a bit of respect.

RICS monthly survey online now

Most surveyors seeing falls rather than rises since survey started in January 1978!

This will lead to many more months of house price fall data from Halixa and Nationwide.

Brown meets bank chiefs

So Gordon wants to use his clunking fist on the bank chiefs. I wonder if he is calling in Ron 'Non-Dom' Sandler head of Darling's bank Northern Crock?

Apparently the banks are not passing on the Bank of England rate cuts. This is because the inter-bank rate is still stuck at around the levels before the rate cuts.

So what can be done? Well the banks need to have access to cheaper funds.

This is possible if the Bank of England and the government act decisively now and listen to what the bank chiefs require - a cheap money line from the Bank of England.

I predict the usual dither and delay. We'll see.

In actual fact the government giving the deposit to first time buyers, nationalising a bank and funding the mortgage banks all sounds a bit controlling, doesn't it?

Update at 2.30pm - yes I was right. Nothing has come from the meeting. No rush though chaps. Take your time. We'll just let the homeowners suffer.

Monday, 14 April 2008

Gordon the Jonah strikes again

What does this 'Brownie' tell us?

From PMQs on 26th March 2008

Nicholas Clegg

Home repossession orders now stand at 100,000—the same as in 1990

Repo actions entered - 145350 in 1990 and 132972 for the 4 quarters ending Q3 2008 (Q4 data not yet available)

—and house prices are falling faster than they were even then.

By the end of 1990 the average house price was £69030 down from it's peak of £70246 in May 1989 a drop of 1.7%.

Does the Prime Minister still deny that the crisis facing British home owners today looks at least as bad as the Tory recession of the early 1990s?

Gordon Brown

I do not know when the Liberal party (Liberal Democrats actually but hey what's in a name Newlabour/Old labour?) will ever learn.

Interest rates were 18 per cent. at one point in the early 1990s;

Nope - 15% yes but hey what's 3% if it's not spun and lied about

they are 5.25 per cent. today. The number of repossessions in the last year was 27,000;

True - although these are repossessions not repossession orders. A repossession order comes before a repossession. So a classic Brownie.

in the first two years of the 1990s, it was 200,000.

Not true - 119,400 in 1990 & 1991. 188000 if you include 1992

We are dealing with a quite different situation and the reason is that we did not take the advice of the Liberal party, but pursued policies for economic stability.

No response to the house price question - Halifax house prices were at £196465 in Feb 08 down 1.5% from £199600 in Aug 07. A further 2.5% fall in March adds to the woe.

So the question is this-

- does Gordon not understand the question
-does Gordon understand the question but believes his answer that things are not as bad?
- is Gordon simply delusional?

Historic Northern Rock e-mail

I dug out an old e-mail from Northern Rock from July 2007 with this paragraph of interest.

Our Fast Track Guarantee for cases up to 85% LTV we will guarantee not to request verification of your client's income, provided that they meet our criteria upon submitting their application (please refer to the Mortgage Update for full details).

Now I wonder why they would guarantee not to check incomes?

Could be anything to do with this scandal yet to develop?


The important bit

However, Mahmood hit back, saying: “The FSA should check 10 files of every broker in the mortgage industry and the income declared on the application should be verified by the Inland Revenue.

“Then the FSA would find out how many applicants declared their genuine income compared to how many applicants and mortgage brokers had submitted correct and genuine information.”

Why Brown and Darling just don't get it.

Hearing that Darling wants lenders to introduce more 25 year fixed rates in order to protect against interest rate shocks, leads me to believe that the Government (I am using the term loosely as there does not seem to be much governing going on) is fighting the last battle all over again.

Let's be clear, in the last housing crash in 1989-1993 interest rates rose causing mortgage payments to become unaffordable. The resulting repossessions drove down the housing market over the 4 years. Interest rates fell, the housing market stabilised and confidence in the market returned.

That was the last battle.

This time around lenders relaxed their lending criteria over the last 6 years. This enabled borrowers to borrow historically unprecedented amounts from their lender, with minimal proof of income or means of repayment. This has lead to the greatest housing bubble in history.

Now the bubble is deflating, how can a house price crash be stopped.

The easiest way is to go back 6 years and for the government to lead and not follow. The debt burden has been talked about by economists and opposition MPs constantly over the last few years and nothing has been done.

OK so assuming no time machine exists, this is another Gordon Brown mess that needs sorting out.

The only way to stop this is for the lenders to continue to offer excessive mortgages to borrowers that should not be granted them. This is not going to happen.

Can the Bank of England pump enough liquidity into the system to allow lenders to be generous again? I doubt it.

Is Gordon Brown's £1500 bung to First time buyers going to save the market? Nope.

In my opinion nothing can now be done. The real question to ask is how low will the market go.

Sunday, 13 April 2008

Brown/Blair Cartoon

Another great GARLAND Cartoon

Matt's property ladder

Brilliant see it here

Saturday, 12 April 2008

House building

When house prices were rising the ever capable (not) Mrs Balls said that this was because there were not enough houses and was a sign of the economic success of the government.

Now that house prices are falling does that mean that there are too many houses and that this is a sign of the economic failure of the government?

Or is it more likely that house prices have risen so much because lenders relaxed their lending criteria to such a degree that they were lending up to 6 times incomes with no proof of the income required and no proof of how the mortgage was going to be repaid.

Since the criteria has been tightened slightly house prices have started to fall. If the criteria is tightened further expect the much anticipated housing crash to be here.

In case you wondered

When I'm not complaining about the Government I'm playing Fallen sword for FREE.

Join me here

Darling bottles out of his Bloomberg interview

To add additional embarrassment to the Government's shambolic presence in the media, Alastair Darling cancels his much hyped Bloomberg live interview 10 minutes after it was due to start, much to the bemusement of the presenters.

Gordon Brown will be proud.

A promotion to Corporal Ditherer is recommended.