Forum Activity
Unemployment Rocketing. 5.7 million. Reaching 90's peak.
http://blogs.telegraph.co.uk/finance/edmun...mployment-toll/
QUOTE 5.7m and climbing: the real unemployment toll
By Edmund Conway Economics Last updated: November 11th, 2009
41 Comments Comment on this article
The labour market figures published this morning were pretty encouraging, showing that the the number of people out of work is, if not falling precipitously, then at least rising far more slowly than previously. Indeed, look beneath the headline figures which showed a 30,000 increase in the number of people out of work between July and September to 2.46m and you can see broad based signs of improvement.
But it is important not to lose sight of the scale of the problem. Weve all heard plenty about the youth unemployment issue (rising to around 20pc of people under 25 now) but the problem is far broader than that. In my column a few weeks ago I mentioned that if you add up all the people who would like to work but for various reasons cant get hold of a job (something Chris Dillow looked at last month), you actually get the rather more alarming unemployment figure of 5.6m.
The latest figures show that this is now closer to 5.7m, (over 15pc of the working age workforce) and is reaching the peaks it hit in the early 1990s. To clarify, this measure of unemployment includes: official unemployment, those classed as economically inactive who actually want a job and part time workers who would rather be working full time. Here is a chart showing you just how sharp the increase in this category has been over the past year or so.
Incidentally, it is worth pointing out that in the US, where politicians are frequently bemoaning the onset of a major employment crisis, their equivalent level of comprehensive unemployment is at 17.7pc.
QUOTE 5.7m and climbing: the real unemployment toll
By Edmund Conway Economics Last updated: November 11th, 2009
41 Comments Comment on this article
The labour market figures published this morning were pretty encouraging, showing that the the number of people out of work is, if not falling precipitously, then at least rising far more slowly than previously. Indeed, look beneath the headline figures which showed a 30,000 increase in the number of people out of work between July and September to 2.46m and you can see broad based signs of improvement.
But it is important not to lose sight of the scale of the problem. Weve all heard plenty about the youth unemployment issue (rising to around 20pc of people under 25 now) but the problem is far broader than that. In my column a few weeks ago I mentioned that if you add up all the people who would like to work but for various reasons cant get hold of a job (something Chris Dillow looked at last month), you actually get the rather more alarming unemployment figure of 5.6m.
The latest figures show that this is now closer to 5.7m, (over 15pc of the working age workforce) and is reaching the peaks it hit in the early 1990s. To clarify, this measure of unemployment includes: official unemployment, those classed as economically inactive who actually want a job and part time workers who would rather be working full time. Here is a chart showing you just how sharp the increase in this category has been over the past year or so.
Incidentally, it is worth pointing out that in the US, where politicians are frequently bemoaning the onset of a major employment crisis, their equivalent level of comprehensive unemployment is at 17.7pc.
Categories: Forum Activity
Ireland: Bad bank, brighter future?
If this one also blows up in their faces, things will look very dim for a very long time....
http://www.bloomberg.com/apps/news?pid=206...BHSUQ&pos=5
Irelands EU54 Billion Gamble on Banks, Property Nears Approval
By Dara Doyle and Ian Guider
Nov. 12 (Bloomberg) -- The biggest financial gamble in modern Irish history is about to exit the realms of theory and enter the real world.
Lawmakers will today pass a bill creating a so-called bad bank that will pay the countrys biggest banks 54 billion euros ($81 billion), or about a third of gross domestic product, for property loans to free up lending. The agency plans to start buying loans by the end of the year, according to a plan published last month.
Finance Minister Brian Lenihan is seeking to end a crisis thats wiped 70 percent from the countrys benchmark stock index, sent bond spreads soaring to the highest in at least a decade and destroyed Irelands status as Europes most dynamic economy. Real-estate prices have on average dropped 50 percent since peaking in 2007, and bad debts at lenders led by Bank of Ireland Plc and Allied Irish Banks Plc are surging.
This is our biggest financial experiment by far, said Eoin Fahy, an economist at KBC Asset Management in Dublin, which manages the equivalent of 8.4 billion euros. Its another step in solving the Irish crisis, and spreads versus Germany should tighten over the next three or four years.
While the difference in yield, or spread, between 10-year Irish debt and the German equivalent has dropped to 137 basis points from 284 basis points in March, that compares with an average of 28 basis points over the last 10 years.
Lawmakers are due to vote on the National Asset Management Agency legislation by 3:30 p.m. in Dublin, according to the parliament schedule. The government hopes to get final approval from the European Commission later this month.
Bank Shares
Lenihan has already helped to ease the worst of the crisis. The ISEF index of Irish financial shares has almost doubled in value since he first outlined the bad-bank plan in April. Hes also injected 3.5 billion euros into both Bank of Ireland and Allied Irish and has nationalized Anglo Irish Bank Corp.
Ireland came close to the wire earlier this year, Lenihan said on Nov. 5. As a domestic real-estate slump compounded the impact of the global financial crisis, Irelands economy shrank in 2008 for the first time in a quarter century. The recession deepened this year, with the government forecasting a contraction of almost 8 percent, which would be twice the euro-area average.
For the banks, NAMA ensures their survival, said Simon Maughan, an analyst at MF Global Securities Ltd. in London. Without it and in the absence of any other option, there is no survival.
Property Values
Opponents including Fine Gael, the largest opposition political party, say banks will hoard the cash rather than lend as they brace themselves for a second wave of bad losses in mortgage and personal loans, and try to rebuild their capital.
While the agency forecasts a 5.5 billion-euro profit over its lifespan, banking consultant Peter Mathews says it will struggle to recover loans, saddling taxpayers with assets worth far less than the government pays. In one example, a site on Dublins Poolbeg Peninsula close to the citys port, which sold for 413 million euros in 2007, is now worth 85 percent less, the government estimates.
NAMA is a disaster, said Mathews, who expects the agency to lose about 12 billion euros. Its like pointing a car downhill facing a cliff and hoping that by some magical gravitational pull, the road will move upwards.
Guarantee
The government last year guaranteed banks deposits and most of their debts as the financial system neared collapse, a move that became the template for plans across Europe. Lenihan has said he will inject further cash into the banks if needed after NAMA, which would see the state increase its current 25 percent stakes.
Ireland made a mistake earlier when they guaranteed all the liabilities of the banks, former Bank of England policy maker Willem Buiter said on Bloomberg Radio on Nov. 10. Creditors can no longer be asked to take a haircut or to be transformed into equity holders. The only place to dump the toxic assets is on the taxpayer.
NAMA is buying property loans with book value of 77 billion euros from three banks and two building societies at an average discount of 30 percent. Lenihan estimates that the loans are currently worth about 47 billion euros. By overpaying by 7 billion euros, the government avoids bankrupting the banks and adds cash into the system to help revive lending.
The move also adds to public debt at a time when the deficit is already set to reach at least 20 billion euros this year.
For investors outside Ireland, it removes the fear that one bank could go wallop quickly and leave a 10 billion or 15 billion-euro hole in the public finances, said Rossa White, chief economist at Dublin-based securities firm Davy. Liquidity should no longer be a problem.
http://www.bloomberg.com/apps/news?pid=206...BHSUQ&pos=5
Irelands EU54 Billion Gamble on Banks, Property Nears Approval
By Dara Doyle and Ian Guider
Nov. 12 (Bloomberg) -- The biggest financial gamble in modern Irish history is about to exit the realms of theory and enter the real world.
Lawmakers will today pass a bill creating a so-called bad bank that will pay the countrys biggest banks 54 billion euros ($81 billion), or about a third of gross domestic product, for property loans to free up lending. The agency plans to start buying loans by the end of the year, according to a plan published last month.
Finance Minister Brian Lenihan is seeking to end a crisis thats wiped 70 percent from the countrys benchmark stock index, sent bond spreads soaring to the highest in at least a decade and destroyed Irelands status as Europes most dynamic economy. Real-estate prices have on average dropped 50 percent since peaking in 2007, and bad debts at lenders led by Bank of Ireland Plc and Allied Irish Banks Plc are surging.
This is our biggest financial experiment by far, said Eoin Fahy, an economist at KBC Asset Management in Dublin, which manages the equivalent of 8.4 billion euros. Its another step in solving the Irish crisis, and spreads versus Germany should tighten over the next three or four years.
While the difference in yield, or spread, between 10-year Irish debt and the German equivalent has dropped to 137 basis points from 284 basis points in March, that compares with an average of 28 basis points over the last 10 years.
Lawmakers are due to vote on the National Asset Management Agency legislation by 3:30 p.m. in Dublin, according to the parliament schedule. The government hopes to get final approval from the European Commission later this month.
Bank Shares
Lenihan has already helped to ease the worst of the crisis. The ISEF index of Irish financial shares has almost doubled in value since he first outlined the bad-bank plan in April. Hes also injected 3.5 billion euros into both Bank of Ireland and Allied Irish and has nationalized Anglo Irish Bank Corp.
Ireland came close to the wire earlier this year, Lenihan said on Nov. 5. As a domestic real-estate slump compounded the impact of the global financial crisis, Irelands economy shrank in 2008 for the first time in a quarter century. The recession deepened this year, with the government forecasting a contraction of almost 8 percent, which would be twice the euro-area average.
For the banks, NAMA ensures their survival, said Simon Maughan, an analyst at MF Global Securities Ltd. in London. Without it and in the absence of any other option, there is no survival.
Property Values
Opponents including Fine Gael, the largest opposition political party, say banks will hoard the cash rather than lend as they brace themselves for a second wave of bad losses in mortgage and personal loans, and try to rebuild their capital.
While the agency forecasts a 5.5 billion-euro profit over its lifespan, banking consultant Peter Mathews says it will struggle to recover loans, saddling taxpayers with assets worth far less than the government pays. In one example, a site on Dublins Poolbeg Peninsula close to the citys port, which sold for 413 million euros in 2007, is now worth 85 percent less, the government estimates.
NAMA is a disaster, said Mathews, who expects the agency to lose about 12 billion euros. Its like pointing a car downhill facing a cliff and hoping that by some magical gravitational pull, the road will move upwards.
Guarantee
The government last year guaranteed banks deposits and most of their debts as the financial system neared collapse, a move that became the template for plans across Europe. Lenihan has said he will inject further cash into the banks if needed after NAMA, which would see the state increase its current 25 percent stakes.
Ireland made a mistake earlier when they guaranteed all the liabilities of the banks, former Bank of England policy maker Willem Buiter said on Bloomberg Radio on Nov. 10. Creditors can no longer be asked to take a haircut or to be transformed into equity holders. The only place to dump the toxic assets is on the taxpayer.
NAMA is buying property loans with book value of 77 billion euros from three banks and two building societies at an average discount of 30 percent. Lenihan estimates that the loans are currently worth about 47 billion euros. By overpaying by 7 billion euros, the government avoids bankrupting the banks and adds cash into the system to help revive lending.
The move also adds to public debt at a time when the deficit is already set to reach at least 20 billion euros this year.
For investors outside Ireland, it removes the fear that one bank could go wallop quickly and leave a 10 billion or 15 billion-euro hole in the public finances, said Rossa White, chief economist at Dublin-based securities firm Davy. Liquidity should no longer be a problem.
Categories: Forum Activity
Repossessions rise by 3%
http://www.guardian.co.uk/money/2009/nov/1...ions-rise-again
The number of homes repossessed in the UK rose by 3% in the third quarter of the year to 11,700, the Council of Mortgage Lenders (CML) said today.
However, the figure was lower than the 12,700 repossessed in the first quarter of the year.
The number of households in arrears on their mortgage has also fallen over the course of the year, and dropped during the three months to the end of September. By the end of the third quarter 194,600 mortgages, 1.77% of the total, were in arrears of 2.5% or more of the outstanding mortgage balance. This compares with 204,200 cases (1.86% of all mortgages) at the end of June.
As a result of the slowdown in the number of households falling into difficulties, the CML said it was cutting its forecast for the year from 65,000 to 48,000.
The CML had already reduced its forecast for repossessions for the year from 75,000 due to a combination of low interest rates, government initiatives to help people struggling with their mortgage and increased forbearance on the part of lenders.
More details soon
The number of homes repossessed in the UK rose by 3% in the third quarter of the year to 11,700, the Council of Mortgage Lenders (CML) said today.
However, the figure was lower than the 12,700 repossessed in the first quarter of the year.
The number of households in arrears on their mortgage has also fallen over the course of the year, and dropped during the three months to the end of September. By the end of the third quarter 194,600 mortgages, 1.77% of the total, were in arrears of 2.5% or more of the outstanding mortgage balance. This compares with 204,200 cases (1.86% of all mortgages) at the end of June.
As a result of the slowdown in the number of households falling into difficulties, the CML said it was cutting its forecast for the year from 65,000 to 48,000.
The CML had already reduced its forecast for repossessions for the year from 75,000 due to a combination of low interest rates, government initiatives to help people struggling with their mortgage and increased forbearance on the part of lenders.
More details soon
Categories: Forum Activity
newsnight 12 november
I don't have a link, but it's worth watching the studio discussion in which Norman Lamont, David Blanchflower and Kirsty Wark discuss on today's inflation report, QE's imminent end, and the prospects for house prices. Lamont describes the recovery in house prices as artificial, while blanchflower nods furiously in agreement.
Paul Mason's report also included a short piece about Cameron's attitude to QE, the upshot of which is that the Tories won't be continuing with it.
House prices back to Earth next year then.
Paul Mason's report also included a short piece about Cameron's attitude to QE, the upshot of which is that the Tories won't be continuing with it.
House prices back to Earth next year then.
Categories: Forum Activity
OT: The Integrated Tariff of the United Kingdom 2008/9
I'd like a copy of the above document for some research, but the buggers at hmrc want £260 for it.
Don't suppose anyone has last years lying around at work that they don't need? or could sneak a peak at it...
Cheers
Don't suppose anyone has last years lying around at work that they don't need? or could sneak a peak at it...
Cheers
Categories: Forum Activity
CML: gloomy future for mortgage brokers
Bleak prognosis for mortgage brokers, the mortgage market, and of course house prices. Long-term stagnation ahoy...
torygraph
QUOTE The Council of Mortgage Lenders predicts gloomy future for mortgage borrowers
The Council of Mortgage Lenders remains unimpressed by the bank restructuring and reckons that many borrowers will struggle to get a mortgage.
Published: 7:50AM GMT 11 Nov 2009
The Council of Mortgage Lenders remains unimpressed by the bank restructuring and reckons that many borrowers will struggle to get a mortgage for many months to come.
Ahead of it s annual conference on Friday, the CML said that it agrees with the many housing analysts that predict a period of only modest recovery in prices, which could extend for some years beyond 2010.
In the latest monthly newsletter it said that "we have stability in the mortgage market but at the risk of stagnation".
It concludes that current market conditions are unlikely to precipitate a rush to enter the market, so the opportunities may only be fully realised in the medium or longer term and that we are unlikely to see a return to the highly competitive mortgage market we saw before the credit crunch.
It added: "Ultimately, the restructuring could play a part in what is likely to be a slow improvement in the availability of mortgage funding. But it will not, in itself, restore a properly functioning wholesale mortgage funding market.
"So, while the break-up of assets may contribute to a slow and steady increase in competition and choice, it is unlikely to alter our general view, reinforced in our forthcoming forecasts, that the volume of mortgage lending and market conditions more generally will only improve slowly over a prolonged period."
It also paints a bleak picture of the mortgage market as a whole. It states:
* Some lenders and intermediaries have already left the market, perhaps never to return, given that levels of activity will be lower in future.
* A growing number of borrowers are or will be excluded from entering or transacting in the market. Among this group will be first-time buyers without deposits, customers whose credit rating has worsened because of the recession, and self-certified borrowers who are at risk of being denied access to the market by a change in FSA rules.
* Lenders, as a whole, do not have enough funding for mortgages to help promote the economic activity that will help lift the UK out of recession.
* A mortgage market in which there is a thriving range of different types of lending institution banks, building societies and specialist lenders has largely disappeared. A key challenge is to reverse this trend.
* The development of innovative products capable of delivering real consumer benefits is being constrained. This has removed a traditional advantage for UK customers compared to borrowers in other countries, namely, widespread access to a variety of products tailored to their needs at different stages in life.
* Mortgage costs have risen, and will remain higher than before the credit crunch. And with higher taxes coming through from 2010 onwards, and higher interest rates in due course, consumers capacity to borrow will be further constrained.
* There is a risk of regulatory intervention through the FSAs mortgage market review that does not address these problems, shuts the stable door after the market has corrected itself and does not focus on the real detriment for borrowers with multiple debts.
torygraph
QUOTE The Council of Mortgage Lenders predicts gloomy future for mortgage borrowers
The Council of Mortgage Lenders remains unimpressed by the bank restructuring and reckons that many borrowers will struggle to get a mortgage.
Published: 7:50AM GMT 11 Nov 2009
The Council of Mortgage Lenders remains unimpressed by the bank restructuring and reckons that many borrowers will struggle to get a mortgage for many months to come.
Ahead of it s annual conference on Friday, the CML said that it agrees with the many housing analysts that predict a period of only modest recovery in prices, which could extend for some years beyond 2010.
In the latest monthly newsletter it said that "we have stability in the mortgage market but at the risk of stagnation".
It concludes that current market conditions are unlikely to precipitate a rush to enter the market, so the opportunities may only be fully realised in the medium or longer term and that we are unlikely to see a return to the highly competitive mortgage market we saw before the credit crunch.
It added: "Ultimately, the restructuring could play a part in what is likely to be a slow improvement in the availability of mortgage funding. But it will not, in itself, restore a properly functioning wholesale mortgage funding market.
"So, while the break-up of assets may contribute to a slow and steady increase in competition and choice, it is unlikely to alter our general view, reinforced in our forthcoming forecasts, that the volume of mortgage lending and market conditions more generally will only improve slowly over a prolonged period."
It also paints a bleak picture of the mortgage market as a whole. It states:
* Some lenders and intermediaries have already left the market, perhaps never to return, given that levels of activity will be lower in future.
* A growing number of borrowers are or will be excluded from entering or transacting in the market. Among this group will be first-time buyers without deposits, customers whose credit rating has worsened because of the recession, and self-certified borrowers who are at risk of being denied access to the market by a change in FSA rules.
* Lenders, as a whole, do not have enough funding for mortgages to help promote the economic activity that will help lift the UK out of recession.
* A mortgage market in which there is a thriving range of different types of lending institution banks, building societies and specialist lenders has largely disappeared. A key challenge is to reverse this trend.
* The development of innovative products capable of delivering real consumer benefits is being constrained. This has removed a traditional advantage for UK customers compared to borrowers in other countries, namely, widespread access to a variety of products tailored to their needs at different stages in life.
* Mortgage costs have risen, and will remain higher than before the credit crunch. And with higher taxes coming through from 2010 onwards, and higher interest rates in due course, consumers capacity to borrow will be further constrained.
* There is a risk of regulatory intervention through the FSAs mortgage market review that does not address these problems, shuts the stable door after the market has corrected itself and does not focus on the real detriment for borrowers with multiple debts.
Categories: Forum Activity
My Full Name & Address
Anyone wanting to contact me please use the following
Consa
AKA
Conrad Paul Greenwood
17 Baldwin Close
Middleton on Sea
Bognor Regis
West Sussex
PO22 6RQ
Link to my last planning job
Enter the planning ref: R/75/09/ into the website linked below
http://www.arun.gov.uk/cgi-bin/buildpage.pl?mysql=3922
Consa
AKA
Conrad Paul Greenwood
17 Baldwin Close
Middleton on Sea
Bognor Regis
West Sussex
PO22 6RQ
Link to my last planning job
Enter the planning ref: R/75/09/ into the website linked below
http://www.arun.gov.uk/cgi-bin/buildpage.pl?mysql=3922
Categories: Forum Activity
message for consa
QUOTE Hi Guys, "sproket" here, one of the moderators in the Aussie subforum
We are having some serious trolling issues down here, people being stalked, names posted in new usernames that we cannot delete, drive-ny photos taken of their house, weird stuff. Plus the inability to register new blood is having a serious effect on morale.
i have been trying to contact consa for quite a while on this, so far, no luck. I understand he has been sick, and can only assume that after his brief reappearance, he has taken a turn for the worse again.
in short, are any of you in regular contact with him who could relay a message?
thanks in advance
We are having some serious trolling issues down here, people being stalked, names posted in new usernames that we cannot delete, drive-ny photos taken of their house, weird stuff. Plus the inability to register new blood is having a serious effect on morale.
i have been trying to contact consa for quite a while on this, so far, no luck. I understand he has been sick, and can only assume that after his brief reappearance, he has taken a turn for the worse again.
in short, are any of you in regular contact with him who could relay a message?
thanks in advance
Categories: Forum Activity
BBC: CML Say home loans levelling off and well below normal levels.
http://news.bbc.co.uk/1/hi/business/8354087.stm
QUOTE Home loans level off, lenders say
Lending to home buyers may have reached a plateau
The recent rise in mortgage lending to house buyers has levelled off, the Council of Mortgage Lenders (CML) says.
In September, 51,000 mortgages were agreed for house purchase, up from 50,000 in August but lower than the 53,000 recorded in July.
The CML said lending in each of those three months had been higher than in the same months last year, after 25 months of steady year-on-year decline.
First-time buyers are still having to put down an average deposit of 25%.
"Although the recent bounce-back in house purchase activity is holding up, we remain some way below what might be called 'normal' levels of transactions," said CML economist Paul Samter.
So, would that be levelling off as in "soft landing" or levelling off as in turning.
Wonder if the pending end of the stamp duty holiday is having an impact.
QUOTE Home loans level off, lenders say
Lending to home buyers may have reached a plateau
The recent rise in mortgage lending to house buyers has levelled off, the Council of Mortgage Lenders (CML) says.
In September, 51,000 mortgages were agreed for house purchase, up from 50,000 in August but lower than the 53,000 recorded in July.
The CML said lending in each of those three months had been higher than in the same months last year, after 25 months of steady year-on-year decline.
First-time buyers are still having to put down an average deposit of 25%.
"Although the recent bounce-back in house purchase activity is holding up, we remain some way below what might be called 'normal' levels of transactions," said CML economist Paul Samter.
So, would that be levelling off as in "soft landing" or levelling off as in turning.
Wonder if the pending end of the stamp duty holiday is having an impact.
Categories: Forum Activity
Mortgage rates fall but loan restrictions tighten
Double bubble for FTBs with deposits I would have thought.
Interesting to see that the new "affordability assesment" factor in likely interest rate hikes.
QUOTE Borrowers will find it harder to take out a competitive new home loan from Woolwich, the mortgage brand of Barclays, after it announced plans to tighten its affordability calculations.
The bank, which is the UKs fourth biggest mortgage lender, is cutting the cost of its popular base-rate tracker deals and will introduce new deals for borrowers with a 25 per cent deposit tomorrow.
It will offer a market-leading lifetime tracker at 2.44 percentage points above base, a pay rate of 2.94 per cent, available up to 75 per cent of a property's value. It has a £999 fee.
However, Woolwich is also raising the interest rate that it uses to assess affordability, making it harder for borrowers to secure any new deal. The rate is jumping from 5.29 per cent to 5.69 per cent, forcing new borrowers to show that they can afford a mortgage with a rate of 5.69 per cent to qualify for a loan, even if they are applying for a lower rate.
Related Links
House prices rise despite more stock on market
How to get a mortgage that is six times your salary
The changes are a blow to thousands of homeowners who are struggling to get a mortgage deal. Mortgage lenders have been accused of restricting the flow of mortgages to the detriment of the recovery in the housing market by insisting on large deposits and a perfect credit history from new applicants.
The lender defended the changes, arguing that it is acting responsibly by ensuring that borrowers will be able to afford repayments even when the base rate rises in the future. The majority of new loans approved by Woolwich are pegged to the Bank of England base rate, currently 0.5 per cent.
The decision to increase its affordability rate follows a similar move by Abbey, the second biggest mortgage lender, in December last year. It changed its lending rules to ensure that all borrowers would be assessed using an interest rate of 7 per cent, up to 5.44 per cent previously.
Aaron Strutt, of Trinity Financial Group, said: "This will make it harder for thousands of borrowers to get the deal that they are looking for from Woolwich and excludes more borrowers from the most competitive rates. Woolwich is clearly looking to cherry pick the most attractive customers."
A spokesperson for Woolwich said: The majority of customers are opting for tracker mortgages now so we have changed our affordability rate so that we can ensure that even in this very low base rate environment, our customers will still be able to afford the loan when rates do start to increase. It is important for Barclays from a responsible lending point of view.
Woolwich also launched a two-year fix available up to 75 per cent of a property's value, with a rate of 3.99 per cent and a £999 fee. The lender marginally cut its competitive lifetime tracker deal by 0.02 percentage points to 2.27 points above base, a pay rate of 2.77 per cent, available up to 70 per cent loan-to-value.
The new lifetime tracker deal for borrowers with a 25 per cent deposit puts Woolwich head to head with HSBC, Britain's biggest bank. It is currently offering a similar deal with a pay rate of 2.99 per cent. The two banks are the biggest net lenders in 2009.
Woolwich is not only the lender to have taken steps to address concerns about a sharp rise in the base rate in the future. Yorkshire Building Society introduced a three-year step-tracker mortgage today with a margin above the Bank of England base rate which shrinks over time.
In the first year, borrowers pay 3.49 percentage points above base in year one, a current pay rate of 3.99 per cent. This falls to 1.49 points in the third year, a current pay rate of 1.99 per cent. However, the lender expects the base rate to climb over this time.
Steve McAvan, of Yorkshire Building Society said: "With UK interest rates still at historically low levels, it is widely expected that Bank of England base rate will increase over the next few years."
David Hollingworth, of London & Country Mortgages, another broker, said: "This is a different take on stepped deals that usually try to depress the initial rate. It could help borrowers cope with base rate rises in years to come but ultimately you need to look at the overall value of the product so well have to get the correct detail."
Interesting to see that the new "affordability assesment" factor in likely interest rate hikes.
QUOTE Borrowers will find it harder to take out a competitive new home loan from Woolwich, the mortgage brand of Barclays, after it announced plans to tighten its affordability calculations.
The bank, which is the UKs fourth biggest mortgage lender, is cutting the cost of its popular base-rate tracker deals and will introduce new deals for borrowers with a 25 per cent deposit tomorrow.
It will offer a market-leading lifetime tracker at 2.44 percentage points above base, a pay rate of 2.94 per cent, available up to 75 per cent of a property's value. It has a £999 fee.
However, Woolwich is also raising the interest rate that it uses to assess affordability, making it harder for borrowers to secure any new deal. The rate is jumping from 5.29 per cent to 5.69 per cent, forcing new borrowers to show that they can afford a mortgage with a rate of 5.69 per cent to qualify for a loan, even if they are applying for a lower rate.
Related Links
House prices rise despite more stock on market
How to get a mortgage that is six times your salary
The changes are a blow to thousands of homeowners who are struggling to get a mortgage deal. Mortgage lenders have been accused of restricting the flow of mortgages to the detriment of the recovery in the housing market by insisting on large deposits and a perfect credit history from new applicants.
The lender defended the changes, arguing that it is acting responsibly by ensuring that borrowers will be able to afford repayments even when the base rate rises in the future. The majority of new loans approved by Woolwich are pegged to the Bank of England base rate, currently 0.5 per cent.
The decision to increase its affordability rate follows a similar move by Abbey, the second biggest mortgage lender, in December last year. It changed its lending rules to ensure that all borrowers would be assessed using an interest rate of 7 per cent, up to 5.44 per cent previously.
Aaron Strutt, of Trinity Financial Group, said: "This will make it harder for thousands of borrowers to get the deal that they are looking for from Woolwich and excludes more borrowers from the most competitive rates. Woolwich is clearly looking to cherry pick the most attractive customers."
A spokesperson for Woolwich said: The majority of customers are opting for tracker mortgages now so we have changed our affordability rate so that we can ensure that even in this very low base rate environment, our customers will still be able to afford the loan when rates do start to increase. It is important for Barclays from a responsible lending point of view.
Woolwich also launched a two-year fix available up to 75 per cent of a property's value, with a rate of 3.99 per cent and a £999 fee. The lender marginally cut its competitive lifetime tracker deal by 0.02 percentage points to 2.27 points above base, a pay rate of 2.77 per cent, available up to 70 per cent loan-to-value.
The new lifetime tracker deal for borrowers with a 25 per cent deposit puts Woolwich head to head with HSBC, Britain's biggest bank. It is currently offering a similar deal with a pay rate of 2.99 per cent. The two banks are the biggest net lenders in 2009.
Woolwich is not only the lender to have taken steps to address concerns about a sharp rise in the base rate in the future. Yorkshire Building Society introduced a three-year step-tracker mortgage today with a margin above the Bank of England base rate which shrinks over time.
In the first year, borrowers pay 3.49 percentage points above base in year one, a current pay rate of 3.99 per cent. This falls to 1.49 points in the third year, a current pay rate of 1.99 per cent. However, the lender expects the base rate to climb over this time.
Steve McAvan, of Yorkshire Building Society said: "With UK interest rates still at historically low levels, it is widely expected that Bank of England base rate will increase over the next few years."
David Hollingworth, of London & Country Mortgages, another broker, said: "This is a different take on stepped deals that usually try to depress the initial rate. It could help borrowers cope with base rate rises in years to come but ultimately you need to look at the overall value of the product so well have to get the correct detail."
Categories: Forum Activity
BofE inflation report Nov
http://www.bankofengland.co.uk/publication...ame=ir09nov.pdf
They have no more idea of what CPI is going to be than we do!
Looks like the GDP is going to be W shaped after all.
They have no more idea of what CPI is going to be than we do!
Looks like the GDP is going to be W shaped after all.
Categories: Forum Activity
Catchphrase
Who said:
"the market has got ahead of itself in terms of the timing of rate hikes"
Categories: Forum Activity
Unemployment up
Employment
QUOTE The unemployment rate rose by 0.1 percentage point to 7.8 per cent for July to September 2009. The number of unemployed people increased by 30,000 over the quarter to reach 2.46 million. These are the smallest quarterly increases in unemployment since March-May 2008.
QUOTE Full-time employment fell by 80,000, to reach 21.26 million, while part-time employment increased by 86,000 to reach a record high of 7.66 million.
Part-time employment replacing full-time employment while wage inflation continues to fall.
What a great recovery.
Oh and the trade deficit widens.
QUOTE The unemployment rate rose by 0.1 percentage point to 7.8 per cent for July to September 2009. The number of unemployed people increased by 30,000 over the quarter to reach 2.46 million. These are the smallest quarterly increases in unemployment since March-May 2008.
QUOTE Full-time employment fell by 80,000, to reach 21.26 million, while part-time employment increased by 86,000 to reach a record high of 7.66 million.
Part-time employment replacing full-time employment while wage inflation continues to fall.
What a great recovery.
Oh and the trade deficit widens.
Categories: Forum Activity
Independent: Mystery of rising house prices
http://www.independent.co.uk/news/business...es-1817811.html
The mystery of rising house prices
With unemployment up and people avoiding debt, why aren't property prices falling? Sean O'Grady reports
Prices ought to be tanking. And yet ... the Royal Institution of Chartered Surveyors sees a gathering wave of optimism among surveyors
What on earth is happening in the housing market? Of the many economic puzzles thrown up by the recession, this is the most mind-boggling for homeowners, first-time buyers and the wider economy.
The conundrum is this. Unemployment is close to 2.5 million and will go higher. Pay rises are rare. People fear debt. The credit crunch has hardly gone away, meaning that mortgage finance, especially for first-time buyers with slim deposits, and movers with little equity, is expensive, if available at all. Mortgage approvals may be up on last year, but the new money going into the market isn't sufficient to secure rising prices. Values are steep by long-term historical standards in relation to earnings, especially in London.
So prices ought to be tanking. And yet ... the Royal Institution of Chartered Surveyors sees a gathering wave of optimism among surveyors watching their local property scenes, and the Nationwide has just reported rising prices for the sixth month in a row. Prices are stabilising, even rising 0.4 per cent during October, up 2 per cent on last year (though prices are still about a fifth off their peaks). Why? And can it last?
The immediate answer given by all those involved is "shortage of supply". Owners are just not putting their properties on the market, and those that are are often asking unrealistically high prices, though the chill of recession has jolted more into narrowing the gap between what they ask for (as monitored by Rightmove) and what they settle for (as recorded by the Nationwide, Halifax and the Land Registry).
This is not just a question of sellers being in denial about negative or inadequate equity, though there is a psychological reluctance on the part of sellers to accept a loss. That lack of equity in many homes has a more concrete effect it means that moving is difficult at a time when lenders are imposing more demanding terms, such as lower loan-to-equity ratios and more conservative multiples of household income. New rules from the Financial Services Authority that tighten up rules for self-certified and other unconventional customers will exacerbate this trend.
Plainly, banks are only really willing to take on the best credit risks: their precarious balance sheets and losses prevent them from shouldering risks that would have been routine three or four years ago. So, perversely, the lack of mortgage finance has actually pushed prices higher by artificially constricting supply.
Second, the waves of repossessions during the property slump of the early 1990s hasn't materialised, and seems to be another perverse product of the credit crunch. Again, such is the fragile state of many bank and building society balance sheets that few want to crystallise losses by foreclosure. One of the reasons why the bad debts being reported by the banks aren't as high as they might be is because they can't afford any more write-offs so they just let the arrears run. Possibly also because of political pressure, lenders are exercising extreme leniency with wayward mortgage holders. This unprecedented forbearance is blocking another source of ready supply auction sales from distressed sellers.
Third, there are signs of increased demand. Confidence is better, after the apocalyptic mood of much of the past year or so. And there are those out there who are cash-rich. Very cash-rich. At one end, Russian oligarchs and other wealthy foreigners and investment funds are attracted by Britain's real-estate double whammy depressed values plus a sharply depreciated pound adds up, in crude terms, to a 40 per cent discount on peak 2007 prices. Tempting, for some, including speculators who buy some of the best real estate in the capital and allow it to crumble or be squatted.
Banking bonuses seem hardly dented this year, another underpinning. Other pluses are opportunistic buy-to-let investors seeking yields (compared to gilts or deposit accounts, say); those whose parents can supply a cash injection; and those who sat out the bubble and are ready to pounce on bargains now. Much of this activity is in the South, one reason why this part of the country has enjoyed a healthier market.
Yet it is in the nature of markets that most, if not all, of these perverse effects are short-term, and that the fundamentals will eventually re-assert themselves. There will come a point when the pound stops falling; a moment banks can no longer let arrears run; and when the Bank of Mum and Dad runs out of funds.
Other factors, too, are liable to grow more difficult next year at least. The stamp duty holiday on homes costing up to £175,000 will end in the new year, as will the cut in VAT. Next year will see more tax rises, modest pay rises, if any, and interest rates begin to return to slightly more normal levels perhaps 2 per cent by the end of 2010.
The Countrywide chain of estate agents says that the average interest rate for mortgage applicants is 5.13 per cent, down 0.31 per cent from September but still high in real terms. The average deposit required for mortgages monitored by Countrywide is 25 per cent 6 per cent up on September. The 125 per cent mortgage is but a distant memory.
We'll also see higher fuel and energy prices as demand from China and other fast-growing emerging economies push them back towards their old peaks. Unemployment will also be higher. All this means a tight squeeze on people's disposable income their ability to service a home loan.
So there is plenty to suggest that the stabilisation and small rise in values now being witnessed may be no more than a false market, a short-term "boomlet" that will dissipate as the market faces new problems. Prices seem back on their long-term trend level now, but there is every reason to think an undershoot may also be possible, as in the past.
The truth is that the credit crunch is still a reality wholesale money markets remain dysfunctional and only tiny quantities of mortgage-backed securities are being issued. Those markets and the now-disappeared foreign banks are what funded the housing boom. They have been largely replaced by money from the Treasury and the Bank of England. That cannot last for ever, as schemes such as the Bank's Special Liquidity Scheme expire next year and in 2011. Economists are almost unanimous that the bottom of the market has not yet been reached; then again, only a couple of years ago they told us that prices would be flat in 2008 before resuming their upward march this year ...
The property conundrum remains unsolved.
The mystery of rising house prices
With unemployment up and people avoiding debt, why aren't property prices falling? Sean O'Grady reports
Prices ought to be tanking. And yet ... the Royal Institution of Chartered Surveyors sees a gathering wave of optimism among surveyors
What on earth is happening in the housing market? Of the many economic puzzles thrown up by the recession, this is the most mind-boggling for homeowners, first-time buyers and the wider economy.
The conundrum is this. Unemployment is close to 2.5 million and will go higher. Pay rises are rare. People fear debt. The credit crunch has hardly gone away, meaning that mortgage finance, especially for first-time buyers with slim deposits, and movers with little equity, is expensive, if available at all. Mortgage approvals may be up on last year, but the new money going into the market isn't sufficient to secure rising prices. Values are steep by long-term historical standards in relation to earnings, especially in London.
So prices ought to be tanking. And yet ... the Royal Institution of Chartered Surveyors sees a gathering wave of optimism among surveyors watching their local property scenes, and the Nationwide has just reported rising prices for the sixth month in a row. Prices are stabilising, even rising 0.4 per cent during October, up 2 per cent on last year (though prices are still about a fifth off their peaks). Why? And can it last?
The immediate answer given by all those involved is "shortage of supply". Owners are just not putting their properties on the market, and those that are are often asking unrealistically high prices, though the chill of recession has jolted more into narrowing the gap between what they ask for (as monitored by Rightmove) and what they settle for (as recorded by the Nationwide, Halifax and the Land Registry).
This is not just a question of sellers being in denial about negative or inadequate equity, though there is a psychological reluctance on the part of sellers to accept a loss. That lack of equity in many homes has a more concrete effect it means that moving is difficult at a time when lenders are imposing more demanding terms, such as lower loan-to-equity ratios and more conservative multiples of household income. New rules from the Financial Services Authority that tighten up rules for self-certified and other unconventional customers will exacerbate this trend.
Plainly, banks are only really willing to take on the best credit risks: their precarious balance sheets and losses prevent them from shouldering risks that would have been routine three or four years ago. So, perversely, the lack of mortgage finance has actually pushed prices higher by artificially constricting supply.
Second, the waves of repossessions during the property slump of the early 1990s hasn't materialised, and seems to be another perverse product of the credit crunch. Again, such is the fragile state of many bank and building society balance sheets that few want to crystallise losses by foreclosure. One of the reasons why the bad debts being reported by the banks aren't as high as they might be is because they can't afford any more write-offs so they just let the arrears run. Possibly also because of political pressure, lenders are exercising extreme leniency with wayward mortgage holders. This unprecedented forbearance is blocking another source of ready supply auction sales from distressed sellers.
Third, there are signs of increased demand. Confidence is better, after the apocalyptic mood of much of the past year or so. And there are those out there who are cash-rich. Very cash-rich. At one end, Russian oligarchs and other wealthy foreigners and investment funds are attracted by Britain's real-estate double whammy depressed values plus a sharply depreciated pound adds up, in crude terms, to a 40 per cent discount on peak 2007 prices. Tempting, for some, including speculators who buy some of the best real estate in the capital and allow it to crumble or be squatted.
Banking bonuses seem hardly dented this year, another underpinning. Other pluses are opportunistic buy-to-let investors seeking yields (compared to gilts or deposit accounts, say); those whose parents can supply a cash injection; and those who sat out the bubble and are ready to pounce on bargains now. Much of this activity is in the South, one reason why this part of the country has enjoyed a healthier market.
Yet it is in the nature of markets that most, if not all, of these perverse effects are short-term, and that the fundamentals will eventually re-assert themselves. There will come a point when the pound stops falling; a moment banks can no longer let arrears run; and when the Bank of Mum and Dad runs out of funds.
Other factors, too, are liable to grow more difficult next year at least. The stamp duty holiday on homes costing up to £175,000 will end in the new year, as will the cut in VAT. Next year will see more tax rises, modest pay rises, if any, and interest rates begin to return to slightly more normal levels perhaps 2 per cent by the end of 2010.
The Countrywide chain of estate agents says that the average interest rate for mortgage applicants is 5.13 per cent, down 0.31 per cent from September but still high in real terms. The average deposit required for mortgages monitored by Countrywide is 25 per cent 6 per cent up on September. The 125 per cent mortgage is but a distant memory.
We'll also see higher fuel and energy prices as demand from China and other fast-growing emerging economies push them back towards their old peaks. Unemployment will also be higher. All this means a tight squeeze on people's disposable income their ability to service a home loan.
So there is plenty to suggest that the stabilisation and small rise in values now being witnessed may be no more than a false market, a short-term "boomlet" that will dissipate as the market faces new problems. Prices seem back on their long-term trend level now, but there is every reason to think an undershoot may also be possible, as in the past.
The truth is that the credit crunch is still a reality wholesale money markets remain dysfunctional and only tiny quantities of mortgage-backed securities are being issued. Those markets and the now-disappeared foreign banks are what funded the housing boom. They have been largely replaced by money from the Treasury and the Bank of England. That cannot last for ever, as schemes such as the Bank's Special Liquidity Scheme expire next year and in 2011. Economists are almost unanimous that the bottom of the market has not yet been reached; then again, only a couple of years ago they told us that prices would be flat in 2008 before resuming their upward march this year ...
The property conundrum remains unsolved.
Categories: Forum Activity
Return to Victorian Society under the Tories
More evidence for the return of Victorian society, as I predicted on here and on HPC first a few years back
http://news.bbc.co.uk/1/hi/uk_politics/8351744.stm
QUOTE This is a return to ... 19th century liberalism
Of course, universal suffrage won't stop this - first, it'll be the voters that bring this in by voting for the Tories, second, when 70% don't vote anyway universal suffrage is meaningless.
http://news.bbc.co.uk/1/hi/uk_politics/8351744.stm
QUOTE This is a return to ... 19th century liberalism
Of course, universal suffrage won't stop this - first, it'll be the voters that bring this in by voting for the Tories, second, when 70% don't vote anyway universal suffrage is meaningless.
Categories: Forum Activity
Is Lloyds Banking Group the new Enron?
http://www.ianfraser.org/?p=944
QUOTE Doubts remain as to whether the authorities should allow Lloyds Banking Group to proceed with its proposed £13.5bn rights issue and whether investors would be sensible to participate. Here Ian Fraser outlines reasons why the FSA would be unwise to give its blessing to the proposed capital-raising and why, if a rights issue does proceed, shareholders might want to think twice before taking up their rights.
How gullible are people in the City? Its a moot point but one worth exploring given Eric Daniels expectation that investors in the Square Mile can be persuaded to inject a further £13.5bn into Lloyd Banking Groups shares through a rights issue as part of his planned monster capital £21bn raising
The chain-smoking Lloyds boss, pictured above with his Crackberry, needs the money because of the dire state of Lloyds balance sheet, the need to recapitalise (again) and because he is so keen to avoid having to participate in the governments Asset Protection Scheme.
If the bank were to fully participate, the governments stake in LBG would rise from 43% to 62% which would be equivalent to full nationalisation and make Lloyds more susceptible to being fully broken up by the European Union.
While one would expect savvy investors to be somewhat sceptical of Danielss proposals, there may be some who are prepared to give them the benefit of the doubt. This post is mainly for their benefit.
Were such investors to allow themselves be soft-soaped by Lloydss notoriously disingenuous spin machine, they could risk sleepwalking into disaster. Here are 10 reasons why I believe they should avoid the proposed capital raising like the plague.
1. Since its disastrous acquisition of HBOS last September, Lloyds balance sheet has not only become dangerously toxic; it has also largely become a work of fiction. The labyrinthine series of joint ventures that former BoS Corporate boss Peter Cummings entered with property and other business tycoons, often without adequate paperwork or due diligence, are almost certain to be over-valued in the accounts. Some of the firms acquired or part-acquired by BoS in this way, including the Inverness-based builder Tulloch Homes, have only just filed their 2007 accounts, so how can the bank be correctly valuing the equity stakes it owns in them in its accounts? The valuations put on the equity stakes the bank acquired through its pig on pork integrated finance model are also inflated, with mark-to-market accounting improperly applied. Insiders tell me that, owing to internal turmoil and because disgruntled insiders have been throwing spanners in the works, the superbank found it hard to come up with accurate financial data ahead of its interim results. More and more people are wondering whether, just like Enron before it, Lloyds accounts are riddled with fraud.
2. Eric Daniels has claimed the impairments on Lloyds corporate loan portfolio peaked in the first half of 2009. However few analysts or investors believe this. Given the appalling state of the BoS Corporate loan book where reckless loan was piled on reckless loan in an apparent bid to mislead shareholders and enable Peter Cummings and his boardroom colleagues to reap handsome bonuses analysts and investors are right to be sceptical. The chickens will keep coming home to roost from Cummingss poisonous legacy for years to come.
3. The banks funding structure is sub-standard. According to the banking analysts at Credit Suisse, the superbank is over dependent on bonds from the Bank of Englands special liquidity scheme (SLS) and credit guarantee scheme (CGS) which mostly mature in 2011 and 2012. A lot of things trouble us about LBG, in particular the funding structure, said Credit Suisse analyst Jonathan Pierce in a recent research note.
4. Several major court cases are pending in which former HBOS customers who were screwed by the bank are expected to secure compensation stretching into the billions. The chancellor of the High Court recently consented to cases against BoS relating to shared application mortgages (Sams) being dealt with on a class-action basis and the same concession is expected to be applied to the other cases. The scores of business customers who had their assets seized in the BoS Reading fraud, engineered by BoSs ex-director of high-risk Lynden Scourfield, are making progress with their legal action now. I believe the fraud is also, finally, being properly investigated by the FSAs enforcement and financial crimes unit. Imagine if LBG was found guilty of fraud and some of its current and past executives were sent to jail (an outcome one might expect in a country with a fair, independent and accessible justice system). In such a scenario, would Lloyds shares have any value at all?
5. Lloyds Banking Group was always a deliberately oligopolistic construct which Gordon Brown only promoted (probably illegally) in order to get himself out of a hole. However, the resulting superbank is clearly anti-competitive and a danger to its clients. This weekend Alistair Darling has been seeking to post-rationalise his stance, finally siding with EC competition commissioner Neelie Kroes that a break up in necessary. The bank has been ordered to sell at least 600 branches (20% of its branch network), comprising 185 Lloyds TSB Scotland sites, 164 Cheltenham & Gloucester branches and 250 Lloyds TBS branches in England and Wales. Should these gestures prove insufficient, the Office of Fair Trading, Competition Commission and a future Conservative government may step in at a later date to demand further divestments. Doesnt this mean the raison detre for the Lloyds / HBOS merger £1.5bn a year of cost savings through branch closures and massive job cuts has evaporated?
6. The bank was for many years inadequately supervised by the FSA, and its auditors were inadequately supervised by the accountancy bodies and the Financial Reporting Council. In 2002-08 its clear the FSA had been captured by banks including HBOS and Lloyds TSB to the extent the regulator was predisposed to side with banks against their customers. This made it possible for the banks to sweep wrongdoing including the serial expropriation of customer assets under the carpet. In todays tougher regulatory climate, such cover-ups are harder to pull off and past victims are more likely to have to be compensated. I suspect that PwC is going to be much more rigourous and conservative than KPMG when it comes to valuing the banks assets.
7. Lloyds board remains dysfunctional and lacks credibility in the City not least because of its failure properly to attend to the issues described above. Given its history, why should investors believe anything the Lloydss board tells them now? The arrival of Sir Win Bischoff, the German-born banker who retained a self-destructive course while chairman of US bank Citigroup, has not improved things much. Unlike RBS, LBG failed to sack the management team responsible for its catastrophic deal (okay, they got rid of the amoral charlatans who destroyed HBOS, but one wonders why Daniels is still in his job?)
8. The superbank will have to pay the UK government an estimated £2.5bn to extricate itself from the asset protection scheme.
9. If it does carry out a rights issue, Lloyds would have to pay some £400m in underwriting fees to its investment bankers. How would lining the City boys pockets in this way go down with the red tops and the general public in the current climate?
10. Theres no certainty the government of Brian Cowen, the Irish Taoiseach, will permit the disastrous toxic loan portfolio assembled by Bank of Scotland (Ireland) to pollute the Irish governments National Asset Management Agency (Nama). Why should Irish taxpayers be expected to pick up the tab for this poisonous legacy?
Its worth pointing out that, contrary to some reports, the FSA has not formally green-lighted the planned capital raising. All it has done is given Lloyds permission to test the waters and gauge investor appetite for the monster rights issue Daniels has proposed.
Personally, I dont see how sanctioning the scheme can be in the regulators interests. Given what the FSA knows about the BoS Reading fraud and the other serious wrongdoing at Lloyds, why is it even contemplating doing such a thing? Wouldnt green-lighting the scheme leave the FSA wide open to the risk of being sued for negligence down the line?
QUOTE Doubts remain as to whether the authorities should allow Lloyds Banking Group to proceed with its proposed £13.5bn rights issue and whether investors would be sensible to participate. Here Ian Fraser outlines reasons why the FSA would be unwise to give its blessing to the proposed capital-raising and why, if a rights issue does proceed, shareholders might want to think twice before taking up their rights.
How gullible are people in the City? Its a moot point but one worth exploring given Eric Daniels expectation that investors in the Square Mile can be persuaded to inject a further £13.5bn into Lloyd Banking Groups shares through a rights issue as part of his planned monster capital £21bn raising
The chain-smoking Lloyds boss, pictured above with his Crackberry, needs the money because of the dire state of Lloyds balance sheet, the need to recapitalise (again) and because he is so keen to avoid having to participate in the governments Asset Protection Scheme.
If the bank were to fully participate, the governments stake in LBG would rise from 43% to 62% which would be equivalent to full nationalisation and make Lloyds more susceptible to being fully broken up by the European Union.
While one would expect savvy investors to be somewhat sceptical of Danielss proposals, there may be some who are prepared to give them the benefit of the doubt. This post is mainly for their benefit.
Were such investors to allow themselves be soft-soaped by Lloydss notoriously disingenuous spin machine, they could risk sleepwalking into disaster. Here are 10 reasons why I believe they should avoid the proposed capital raising like the plague.
1. Since its disastrous acquisition of HBOS last September, Lloyds balance sheet has not only become dangerously toxic; it has also largely become a work of fiction. The labyrinthine series of joint ventures that former BoS Corporate boss Peter Cummings entered with property and other business tycoons, often without adequate paperwork or due diligence, are almost certain to be over-valued in the accounts. Some of the firms acquired or part-acquired by BoS in this way, including the Inverness-based builder Tulloch Homes, have only just filed their 2007 accounts, so how can the bank be correctly valuing the equity stakes it owns in them in its accounts? The valuations put on the equity stakes the bank acquired through its pig on pork integrated finance model are also inflated, with mark-to-market accounting improperly applied. Insiders tell me that, owing to internal turmoil and because disgruntled insiders have been throwing spanners in the works, the superbank found it hard to come up with accurate financial data ahead of its interim results. More and more people are wondering whether, just like Enron before it, Lloyds accounts are riddled with fraud.
2. Eric Daniels has claimed the impairments on Lloyds corporate loan portfolio peaked in the first half of 2009. However few analysts or investors believe this. Given the appalling state of the BoS Corporate loan book where reckless loan was piled on reckless loan in an apparent bid to mislead shareholders and enable Peter Cummings and his boardroom colleagues to reap handsome bonuses analysts and investors are right to be sceptical. The chickens will keep coming home to roost from Cummingss poisonous legacy for years to come.
3. The banks funding structure is sub-standard. According to the banking analysts at Credit Suisse, the superbank is over dependent on bonds from the Bank of Englands special liquidity scheme (SLS) and credit guarantee scheme (CGS) which mostly mature in 2011 and 2012. A lot of things trouble us about LBG, in particular the funding structure, said Credit Suisse analyst Jonathan Pierce in a recent research note.
4. Several major court cases are pending in which former HBOS customers who were screwed by the bank are expected to secure compensation stretching into the billions. The chancellor of the High Court recently consented to cases against BoS relating to shared application mortgages (Sams) being dealt with on a class-action basis and the same concession is expected to be applied to the other cases. The scores of business customers who had their assets seized in the BoS Reading fraud, engineered by BoSs ex-director of high-risk Lynden Scourfield, are making progress with their legal action now. I believe the fraud is also, finally, being properly investigated by the FSAs enforcement and financial crimes unit. Imagine if LBG was found guilty of fraud and some of its current and past executives were sent to jail (an outcome one might expect in a country with a fair, independent and accessible justice system). In such a scenario, would Lloyds shares have any value at all?
5. Lloyds Banking Group was always a deliberately oligopolistic construct which Gordon Brown only promoted (probably illegally) in order to get himself out of a hole. However, the resulting superbank is clearly anti-competitive and a danger to its clients. This weekend Alistair Darling has been seeking to post-rationalise his stance, finally siding with EC competition commissioner Neelie Kroes that a break up in necessary. The bank has been ordered to sell at least 600 branches (20% of its branch network), comprising 185 Lloyds TSB Scotland sites, 164 Cheltenham & Gloucester branches and 250 Lloyds TBS branches in England and Wales. Should these gestures prove insufficient, the Office of Fair Trading, Competition Commission and a future Conservative government may step in at a later date to demand further divestments. Doesnt this mean the raison detre for the Lloyds / HBOS merger £1.5bn a year of cost savings through branch closures and massive job cuts has evaporated?
6. The bank was for many years inadequately supervised by the FSA, and its auditors were inadequately supervised by the accountancy bodies and the Financial Reporting Council. In 2002-08 its clear the FSA had been captured by banks including HBOS and Lloyds TSB to the extent the regulator was predisposed to side with banks against their customers. This made it possible for the banks to sweep wrongdoing including the serial expropriation of customer assets under the carpet. In todays tougher regulatory climate, such cover-ups are harder to pull off and past victims are more likely to have to be compensated. I suspect that PwC is going to be much more rigourous and conservative than KPMG when it comes to valuing the banks assets.
7. Lloyds board remains dysfunctional and lacks credibility in the City not least because of its failure properly to attend to the issues described above. Given its history, why should investors believe anything the Lloydss board tells them now? The arrival of Sir Win Bischoff, the German-born banker who retained a self-destructive course while chairman of US bank Citigroup, has not improved things much. Unlike RBS, LBG failed to sack the management team responsible for its catastrophic deal (okay, they got rid of the amoral charlatans who destroyed HBOS, but one wonders why Daniels is still in his job?)
8. The superbank will have to pay the UK government an estimated £2.5bn to extricate itself from the asset protection scheme.
9. If it does carry out a rights issue, Lloyds would have to pay some £400m in underwriting fees to its investment bankers. How would lining the City boys pockets in this way go down with the red tops and the general public in the current climate?
10. Theres no certainty the government of Brian Cowen, the Irish Taoiseach, will permit the disastrous toxic loan portfolio assembled by Bank of Scotland (Ireland) to pollute the Irish governments National Asset Management Agency (Nama). Why should Irish taxpayers be expected to pick up the tab for this poisonous legacy?
Its worth pointing out that, contrary to some reports, the FSA has not formally green-lighted the planned capital raising. All it has done is given Lloyds permission to test the waters and gauge investor appetite for the monster rights issue Daniels has proposed.
Personally, I dont see how sanctioning the scheme can be in the regulators interests. Given what the FSA knows about the BoS Reading fraud and the other serious wrongdoing at Lloyds, why is it even contemplating doing such a thing? Wouldnt green-lighting the scheme leave the FSA wide open to the risk of being sued for negligence down the line?
Categories: Forum Activity
G: Pound tumbles after Fitch issues triple-A rating warning
http://www.guardian.co.uk/business/2009/no...-rating-warning
Gilt buyers twitchy?
If IRs rise in 2010, it'll be stories like this which are the reason.
frug.
Gilt buyers twitchy?
If IRs rise in 2010, it'll be stories like this which are the reason.
frug.
Categories: Forum Activity
ESPC Edinburgh - up 15% yoy.
http://www.espc.com/UniversalPages/Oct09Stat.html
QUOTE ◦The average house price in Edinburgh stood at £221,875 in October following an annual rise of 15.4%. The rate of growth was inflated due to a rise in the number of larger properties selling.
◦Comparison of properties of similar size shows pattern of modest growth continued in October.
◦The number of homes sold in Edinburgh during October rose by 10.9% annually.
◦47.1% of homes sold at Fixed Price achieved the asking price last month, up from 24.5% in October 2008.
◦Average time taken to sell a property falls to just over three months having peaked at almost five months earlier in the year.
◦Number of homes brought to the market for sale in October increased annually for the first time in 2009 as more sellers showed a willingness to test the market.
Bugger, I'm going to need to update this.
http://www.youtube.com/watch?v=TCcNUgg9IPM
QUOTE ◦The average house price in Edinburgh stood at £221,875 in October following an annual rise of 15.4%. The rate of growth was inflated due to a rise in the number of larger properties selling.
◦Comparison of properties of similar size shows pattern of modest growth continued in October.
◦The number of homes sold in Edinburgh during October rose by 10.9% annually.
◦47.1% of homes sold at Fixed Price achieved the asking price last month, up from 24.5% in October 2008.
◦Average time taken to sell a property falls to just over three months having peaked at almost five months earlier in the year.
◦Number of homes brought to the market for sale in October increased annually for the first time in 2009 as more sellers showed a willingness to test the market.
Bugger, I'm going to need to update this.
http://www.youtube.com/watch?v=TCcNUgg9IPM
Categories: Forum Activity
Sept house prices up
http://uk.finance.yahoo.com/news/sept-hous...af467c.html?x=0
When its spring again.......... i'll bring again............. tulips from Amsterdam..........
When its spring again.......... i'll bring again............. tulips from Amsterdam..........
Categories: Forum Activity
House prices 'to keep on rising'
A topic relating to house prices ....
http://news.bbc.co.uk/1/hi/business/8350707.stm
QUOTE Rics said this was the strongest survey result in favour of rising prices since December 2006.
QUOTE That was the strongest survey result for London since December 1996.
http://news.bbc.co.uk/1/hi/business/8350707.stm
QUOTE Rics said this was the strongest survey result in favour of rising prices since December 2006.
QUOTE That was the strongest survey result for London since December 1996.
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