Comments: Market turbulence gives a sinking feeling

Hi David,

Some very concerning questions arise here:

1. How did these circumstances arise? If according to the CML we don't have a sub prime industry then all well and good...I am to be convinced and also convimced that it isn't as big or as big a problem as they make out. We mustn't frighten the punters now must we? There has not been one iota for example about American Mortgage Investment Corp. in the general press, let alone the BBC - have they been gagged - the equivalent of a D notice in financial terms?

2. Why were housing costs stripped out of the official inflation measure rather than strengthened given their inclusion allbeit limited in the previous measure?

3. Why was double digit house price inflation allowed by the BOE other than for naked political gain? Any house price crash , if it happens will purely have been a disaster waiting to happen, particularly when this inflation was removed from the BOE's target inflation figures.

4. Why has the BOE been so timid when it should have raised rates to keep a lid on inflation?

5. Have a look at Cramer losing it on US TV. Can you still say that this is a small problem? Check out the link :

6. Cramer any many others on the dealing floors of the US, even though you may not be, are really worried and say the trading conditions are the worst in 20 -25 years.

Posted by Pete Balchin, Solicitor at August 5, 2007 09:27 PM

Well, my prediction (yes only one, it's all that's needed imo), is that The UK will be in the thick of the biggest economic recession it's ever faced in approx two years time. Maybe three...

Points number "2-3" are interesting Mr Balchin, and most definitely aren't in the chinese price index (sorry cpi). Heck, they aren't even weighted poorly; like rents & energy.

Still, it tracks the costs of champaign & mobile phone ringtones... So what do we have to worry about?!

Posted by matthew at August 5, 2007 09:58 PM

I'm getting a bit worried about you.

The CML has never said we don't have a sub-prime mortgage sector, as somebody pointed out to you on the site recently. In fact it has published reports on the UK sub-prime sector. The point is that it is smaller in relative terms than in the US. American Mortgage Investment Corp. was reported in The Times, FT, Telegraph, Guardian, BBC. Not sure about The Sun, but it may have been.

House prices weren't stripped out of the CPI; they were never in it. The CPI is the harmonised index of consumer prices, a Europe-wide measure of inflation, Because most European countries do not have reliable house price data, and different forms of property taxation, they were not included, Work is proceeding on including them, albeit slowly.

Rising house prices reflect a number of factors, the naked political gain of the Bank of England wasn't one of them. Yes, the Bank has been taken by surprise by the recent rise in inflation, as has everybody else, despite a lot of knowing hindsight. But inflation has undershot the target, on average, since independence. My own view is that in present circumstances, with a wide range of price increases outside the Bank's control, it is perfectly acceptable for inflation to be overshooting. Indeed, these were the cicumstances envisaged at the time of independence when there would be much bigger overshoots.

Jim Cramer is clearly as mad as a hatter. Please do not follow him down that road. Your clients need you.

Posted by David Smith at August 5, 2007 10:05 PM

When I said I was worried about you, I meant Pete Balchin. The person who came along afterwards, apart from being unable to spell, is already well down the Cramer route.

Posted by David Smith at August 5, 2007 10:07 PM

Thanks David,

I won't sue you for libel (sic)!

And I am really getting to like you and your droll sense of humour!

Posted by Pete Balchin, Solicitor at August 5, 2007 10:37 PM

Seeing as I'm dyslexic, my spelling doesn't come much as a surprise to most people who actually know me (you're forgiven Mr Smith).

Can you actually point out what's wrong, even my spellchecker isn't showing a mistake (and my eyes hurt this late).

Fwiw, I like Mr Smith too. Especially all the wrong ecomic predictions he likes to make..............
......only joking!.

Seriously now, I think Mr smith needs me as a reality check now and then perhaps. Someone who isn't on a six figure plus salary, went to a normal school (no university) and lives/works outside of London?!.

Naaaa, I won't "spam" your blog anymore Mr smith, but I'll continue to read it, if only for a laugh now & then.

Posted by matthew at August 5, 2007 10:51 PM

That should have been economic predictions^^^^ *sigh*

I forgot to say, at least Mr Smith replys to our posts, even if they aren't all that "intellectually stimulating" for him.

Anyhow enough (I'm sure you're glad D.S. - think of all those wasted kilobytes on you blog server) now, lets hope things aren't as bad I think they will be.

Posted by matthew at August 5, 2007 11:00 PM

Sorry about your dyslexia; champagne was the word that jumped out at me. In terms of the CPI, it is always worth going to the source. Look at Table 3 in this link; you'll see that electronic audio-visual goods have a very small weight in it; 29 parts in 1,000:

Posted by David Smith at August 6, 2007 08:52 AM

Hi David,

Well, will they ever learn? :

I like the bit about all students of history knowing about credit asset bubbles....

Kind regards...

Posted by Pete Balchin, Solicitor at August 6, 2007 01:44 PM

Hi David,

Well as long as there are capitalist systems, I suppose boom follows bust like day and night...

I wonder what Marx would have made of this?

Kind regards...

Posted by Pete Balchin, Solicitor at August 6, 2007 01:46 PM


You should not be too insecure.

Maybe I would recommend a text book called Stanlake: An Introduction to Economics. It's a good general A Level Text Book. When you have read it you will easily be able to get more benefit from discussing the topics with David Smith on a better and higher level.

And he is not other worldly anymore than say any lawyer or doctor who have a certain expertise in their subject. For example lawyers can't predict much better than economists can in their subject - it depends on experience only. Economists get it wrong regularly as do lawyers - it is just the case that lawyers (and I am sure David won't mind me saying Economists) try to predict which way our 'case' or 'view' will go in both scenarios. There are however so many variables.

With kind regards...

Posted by Pete Balchin, Solicitor at August 6, 2007 11:06 PM

Hi David,

What is the truth that American Home Mortgage were resigned to offering loans at 8% against bank rates of 5.25% but still couldn't stay afloat (as a non sub prime lender remember)?.

Does that mean that some mortgagors over here will be paying say 8.75% on their mortgages come the end of the year?


Posted by Pete Balchin, Solicitor at August 6, 2007 11:30 PM

No it doesn't, though anybody unfortunate enough to be paying a standard variable rate is paying 7.75% now. There are plenty of fixed and discounted rate deals below 6%, albeit with big arrangement fees.

Posted by David Smith at August 7, 2007 10:02 AM

I recently got base rate minus 0.31% (currently 5.44%) with arrangement fee of 599 (fairly average fee these days).

Posted by Ed B at August 7, 2007 10:19 AM

Hi David,

I suppose it presupposes that the Bear Sterns and American Mortgage debacles and the fact that the Chinese I understand are moving out of US Treasury Bonds, doesn't affect the supply of credit over here.

And if one of our lot goes under..........

We know that Dresdner Kleinwort's David Owen tells us (reported in the Financial Times, 7 August 2007), that the size of the UK Sub Prime Market is unknown...

Kind regards...

Posted by Pete Balchin, Solicitor at August 7, 2007 12:18 PM

I'm suspicious of these comparisons between the UK and US sub-prime lending market, particularly when they suggest that the UK has a limited sub-prime market.

The UK market has a different structure, and whereas the type of sub-prime sector that is usually discussed may be lower in the UK, the US simply didn't have the enormous BTL sector that we have.

Given that almost all of the BTL loans granted in the past 3 years were collateralised against assets that now have a negative net yield, it would seem sensible for a significant portion of them to now be denoted sub-prime, since income is not sufficient to cash flow interest payments, except through subsidies which are made from personal incomes which have usually not been verified for BTL loans.

The turbulence in financial markets is just beginning. If Bernanke says that the sub-prime fall out will be $100bn, then it is certain to be a great deal more then this (we suspect this because it is clear that the Fed has been using slow-release propaganda tactics to adjust expectations for months now in respect of this issue).

The biggest property market correction since the great depression is far from over, and most of the bills have not been sent out yet, let alone paid - watch the loan rate resets from Autumn push the market over more than currently expected, and wait till real market values get attached to CDOs to see what the clean up bill really is. Watch the Fed squirm as it decides whether to stay serious about inflation, or create the 'bernanke put' by re-inflating the bubble.

Posted by T Gumbrell at August 7, 2007 04:38 PM

Hi David,

What is you take on the Telegraph today?:

US housing crisis deepens as American Home Mortgage and other lenders face defaults

1. American Home Mortgage has filed for bankruptcy in the latest sign the US housing crisis is spreading from sub-prime mortgages to the higher grades of credit risk [with] growing questions over the exposure of European banks and insurers to the US property slump.

2. Credit Suisse warned that 1.5m people were likely to default on home loans worth up to $220bn (108bn) as a huge tranche of mortgages are adjusted upwards over the next 18 months. mortgage and real estate markets".

3. Merrill Lynch said the property slump was now so serious the Federal Reserve would have to start cutting interest rates as soon as October, predicting a fall from 5.25pc to 3.75pc by the middle of next year.

4. Sam Molinari [of Bear Sterns] : compared the credit debacle to the dotcom denouement in 2001 and even the 1987 crash.

"I have been a mortgage banker for 20 years and have never seen such a severe reaction to credit risks in the marketplace, and things may even get worse before they get better," he said.

5. Similar fears have begun to emerge in Germany where Jochen Sanio, head of the financial watchdog Bafin, said the credit squeeze threatened Europe with the most serious banking crisis since 1931.

6. IKB Deutsche Industriebank stunned the markets last week with an admission that it had taken a massive $24bn bet on the US property market without fully informing the board, and suddenly faced imminent collapse. Just 10 days earlier it had claimed to be in rude good health.

6. Dresdner Bank yesterday admitted to $1.4bn in US sub-prime exposure, but said it was well cushioned by business at home.

7. In France, Oddo & Cie is to close three funds making huge losses in sub-prime CDOs, saying it had been "caught out by the sub-prime dilemma". Insurance group AXA has closed two funds hit by the credit turmoil after a rash of redemptions in July.

Posted by Pete Balchin, Solicitor at August 7, 2007 04:43 PM

David - In my last post I mentioned the Fed's dilemma re rates. Does Bernanke ease and create his own 'put', or does the Fed for once stick to its guns, and avois perpetuating moral hazard.

Mr Belchin also raises this question in his last post when he refers to MLynch's prediction of a Fed rate cut by October with more to come.

I know that the Fed is not your bag in the same way the Bank is, but it would be informative to know your thoughts. Do you think the Fed will loosen to shore up the credit markets? What effect would this have on the USD and the yen carry trade do you think?

On a more philosophical level, what do you think about a monetary policy framework that looks to re-inflate bubbles if they start to pop? If the UK property market went the same way as the US, what weighting do you thnk the Bank would give to stopping the carnage versus fighting inflation? Would it stick to its charter?

Posted by tgumbrell at August 7, 2007 05:35 PM

Let me just make a couple of points. I can't keep up a running commentary on pieces like those in the Telegraph, but I don't regard it as good journalism to lump together bleak assessments and publicity seekers and present it as news.

Talk of the worst housing recession since the Great Depression doesn't help. It's certainly not that yet, and I doubt it will end up being worse than the housing recessions of the 1970s and early 1980s. Even this Roubini piece, which is comprehensive, only claims "one of" the worst housing recessions in recent decades:

The Fed will only cut rates if it believes that housing contagion is such that it will lead to a decisive slowdown/recession in the US and that, as a result, the inflation threat will subside. It does not think we are anywhere near that, and neither does the IMF, which sees a US upturn next year. Bernanke's preference will be to keep Fed Funds at 5.25% for as long as he can.

As for recent buy-to-let being sub-prime lending, that's just silly. Sub-prime is what it says on the tin: lending to people with a poor credit history.

Posted by David Smith at August 7, 2007 05:48 PM

Worst housing recession since the 30's: What I actually meant to say was 'the most significant nationwide house price correction since the Great Depression' - of course there is a difference between the extent of price falls and the depth of recession in the sector: the price falls are great even though the housing recession isn't too big (yet??). I stand corrected; thanks for the paper ref.

'Sub-prime is what it says on the tin': This is a case of 'the letter' versus 'the spirit'. Bad credit histories or not (and that remains to be seen - ref the recent FSA investigation for a hint of what may be in the pipeline), lending money to naive 'investors' to buy highly leveraged assets with negative yields and negative cash flows, often using equity withdrawn from other highly leveraged assets (their homes), does have its dangers, whatever definitional tags we use to represent them. House prices in the UK make those in the USA look positively cheap, and our loan market is perhaps not as well-ordered as we would like.

I hope Bernanke acts as you suggest. So, you believe the Fed to be decisively on the the side of inflation fighting....That's how it looks so far, but the test is just beginning for BB. I suspect that he would have done an Ali G (the comedian that chaired the Fed, not the one one from North London) by now if the US$ wasn't under so much pressure.

I know that you can not answer every question, and thank you for your responses. I would be interested to know however, what you think the Bank would do if the same circumstances pertained here? The rate cut in 8/05 appeared to aim at stabilising the housing market (even though it knew that mortgage approvals were already rising by then), and incurred an inflation trade-off. What would the Bank's likely response be to a 10% - 20% fall in house prices (that didn't have an immediate and large impact on GDP)?

Posted by tgumbrell at August 7, 2007 07:16 PM

David - I've looked back over my posts, and actually I didn't say 'biggest housing recession sicne the depression'. Actually, I said 'the biggest property market correction since the Great Depression', and in terms of price falls I believe this to be correct. Isn't this the first time that median nationwide prices have fallen since the 1930's?

Pedantic, but important.

Posted by tgumbrell at August 7, 2007 07:25 PM

Hi David,

Just to say that I do appreciate your insight because it gives my opinion balance, rather than raving like on some of the other sights dealing with in particular asset bubbles, we could mention..

Kind regards...

Posted by Pete Balchin, Solicitor at August 7, 2007 08:05 PM

In terms of US house prices, I risk getting hoist with my own petard here, because I always stress the difference between real and nominal house prices. Nominal prices fell in 1991, though probably by not as much as they'll end up doing this time. Real prices fell more during the earlier corrections but, as I say, that may be another story.

Posted by David Smith at August 7, 2007 09:26 PM

On the other point - I think the Bank would take a hard line in the face of housing market weakness in the UK. I'm tempted to write a piece about the August 2005 interest rate cut, because it has entered the folklore and because it is so widely misunderstood. When the MPC decided, narrowly, to cut rates in August 2005, it was against the backdrop of four successive quarters of below-trend growth and against an overwhelming market expectation, not just of an August cut, but of a couple more to follow. Have a look at the minutes, and it is hard to argue that the MPC was driven by the need to "rescue" the housing market. The minutes are here:

Posted by David Smith at August 7, 2007 09:35 PM

Hi David,

Whats about with the sinking feeling?

Wont it be nice to live with normal economic fundamentals for a while?
The return of CASH as deposit or otherwise as a respectable asset class is finally establishing itself again......those who have ignored it certainly are paying the price now. A while ago you mentioned that all that excess money was just "credit" and shouldn't therefor count as an inflationary factor on cash....Well how right you were!
Look around the financial markets, credit, cash, or underwriting in general is ....well just not what it used to be it?
I have seen it all before, soon we'll be picking up those really expensive consumer items up from everywhere for not too much cash.
By the way my local FKS buildbase keeps sending me almost monthly price increase notifications of manufacters...never seen any increase less than 4-5 % most are 9-11%. have a feeling that rates may hit 6% much sooner than my prediction for November.

Best wishes....and cheer up!.....its only money!

Arik Schickendantz

Posted by Arik Schickendantz at August 8, 2007 12:48 AM

Hi Arik,

David thinks 3 more rises are too much before the end of the year. I think possibly they will be needed and more next year...


Posted by Pete Balchin, Solicitor at August 8, 2007 01:08 AM

Hi David,

Arik has a point, I know many people in the smoke who tell me that the DIY branches etc, are alive and well, the restaurants full (early in the month as well), the building materials in particular and necessaries rapidly still gaining in price.

So inflation is still alive and well. Perhaps I was right about 3, 0.25% rises (or one 0.5% and a further rise of 0.25%) before xmas? This may appear unlikely now I warrant, but if the BOE is really committed to keeping IR's within the 2% prediction/mandate perhaos there is life in the old salt yet?

There, after you making me more bullish I am now becoming a bear again...

Kind regards...

Posted by Pete Balchin, Solicitor at August 8, 2007 08:58 AM

As always you leave me a little bemused. I think what you may have in mind is the explanation I gave for the difference between narrow money, mainly notes and coins, and broad money. Broad money is not irrelevant but it has not been closely linked for the past couple of decades to inflation, and it is currently subject to an important distortion; lending to other financial companies.

Comments are welcome, but you're putting pen to paper every time a random thought enters your head. Try to ration it a bit.

Posted by David Smith at August 8, 2007 09:26 AM

This Bloomberg piece, published yesterday, echos my thoughts about the UK sub prime market i.e. it's bigger than is generally understood, and is comparable to the one in the US:

From the statments of the Fed Res and the Bank, David's assessment of their approach appears to be bang on....for now. I still suspect that Bernanke's resolve will weaken soon. King's certainly will not, but that of other members of the MPC will.

Interesting times.

Posted by t gumbrell at August 9, 2007 09:38 AM

This Bloomberg piece, published yesterday, echos my thoughts about the UK sub prime market i.e. it's bigger than is generally understood, and is comparable to the one in the US:

From the statments of the Fed Res and the Bank, David's assessment of their approach appears to be bang on....for now. I still suspect that Bernanke's resolve will weaken soon. King's certainly will not, but that of other members of the MPC will.

Interesting times.

Posted by t gumbrell at August 9, 2007 09:39 AM

I know the writer but I'm afraid that's an embarrassingly bad piece. Since when did the average British home cost 11 times' salary? And why should a 40% rise in house prices over the next few years generate a sub-prime crisis? Surely all those borrowers would simply sell. There's no evidence whatsoever presented to support the claim of the headline.

Posted by David Smith at August 9, 2007 10:08 AM

I enjoy reading the comments posted here, even if I have a difficult time following some of the arguments. For example, I don't see how 'a 40% rise in house prices over the next few years would generate a sub-prime crisis'. However, living in Merseyside where the 'average house price' is 147,060, and the 'average wage is 12,199', the conclusion would be that the average house price would be over 12 times the average salary, would it not? Even if that 'average house' was bought by a couple with 'average salaries', it would still be 6 times the amount. It was the National Housing Federation (NHF) that warned prices were now almost 11 times the average wage.

Posted by Walter Zuk at August 9, 2007 11:43 AM

I think it all depends on the metrics you use. From the lowest to the highest estimates there is a difference of c. 20%. However, even on the highest reckoning, I think that 11 times is way OTT as a national figure. I think 9 times is about right. Of course there are parts of the country where the figure is way over 11X.

My more general point was that BTL should perhaps be seen as a form of sub-prime because loans made in the past three years or so have been granted at extremely high levels of leverage against assets that have negative net yields and negative cash flows. To re-phrase: loans have been granted to amateur 'investors' in order to allow them to speculate on asset price movements. Technically not sub-prime, BUT in reality?.....

Posted by t gumbrell at August 9, 2007 01:03 PM

t gumbrell,

"BTL should perhaps be seen as a form of sub-prime because loans made in the past three years or so have been granted at extremely high levels of leverage"

I don't think leverage levels in BTL are that high. Max LTVs are generally lower for BTL mortgages than owner-occupier mortgages, you'd be struggling to find more than 90% and lower figures are more common. What's more BTL mortgages taken out over the last three years will have seen capital appreciation reducing the effective LTV. These BTL landlords will be able to sell their property for more than the loan value unless prices fall considerably. The problem in the US sub prime market is that loans were taken out at very high LTV (100%) leaving them susceptible to even small price falls. I don't think UK BTL can be compared to sub-prime.

Posted by Ed B at August 9, 2007 02:31 PM

Thanks for contributions, but:

Average house prices are 6-7 times average earnings. Average earnings in Liverpool are not half the level of national average earnings. If the British Housing Federation is saying average house prices are 11 times earnings, it needs to find a new statistician.

Posted by David Smith at August 9, 2007 05:21 PM

Fair enough, but where would one find out what the average earnings are, and why are those sort of figures given out to the media? Also, how is the this average figure arrived at? I wonder if there are not a lot more people making that 12,000 figure than the plus 20,000 one? However, here is where I noticed the figures I mentioned.

"(The Public Policy Research report), due to be published in full in October, focused on the government's own yardstick of average income per head, including benefits, reckoned to be the best indicator of economic prosperity. Their inquiry found that Merseyside's average per head income is 11,810 a year compared to 22,441 in inner West London. In the Eastern parts of Merseyside, including St Helens, it is 10,992 compared to, for example, 17,415 in Bucks. Sefton's per head average is 12,576 compared to 16,263 in Hertfordshire, while Wirral's 13,255 contrasts with 17,785 in Surrey. Liverpool Echo August 4, 2007

The Liverpool Daily Post said this morning, "Currently, the average person in the North West earns 12,199"

The quote from the British Housing Federation is on BBC.

Posted by Walt at August 9, 2007 08:48 PM

I'm not sure what average income is either. I imagine that the mean and median differ substantially. But, let's say for arguments sake that average income in the UK 25K; I doubt it is higher than that on any measure, but I'm sure David will correct me if wrong. Well, the rightmove index shows average prices at 240K, so that's 10X. The land registry reckons 210K, so that's 8.5X. Halifax is 200K, so that's 8X as well.

David, six times seems a little modest, one of your handy refernces would be welcome.

Ed B - the problem with the US sub-prime was not falling values. You've got cause and effect confused. Falling values were caused by foreclosures. Foreclosures were caused by debtors being unable to cash flow the loans when rates rose above expectation. Now, think about the BTL market from a cash flow perspective given rate trends in the UK. It's gotta be getting pretty tight for some. Foreclosures are on the rise in the UK too. The equity cushion is not so soft when the bills can't be paid.

Posted by t gumbrell at August 9, 2007 09:10 PM

I can understand your confusion. The IPPR figures refer to average income per head i.e. including children, whereas the conventional way of measuring house prices has been in relation to average earnings. I've had a look at the Housing Federation report and they've just got their earnings numbers wrong. Here's a link to the median earnings figures:

As you'll see, the median in 2006 was 447 a week, 23,244 a year. The median house price in England & Wales in 2006 was 166,000, according to Land Registry data. That gives a house price-earnings ratio of 7.1. To add a further complication, however, house prices have been conventionally measured in relation to male earnings, 487 a week, 25,324 a year, which brings us down to 6.5.

If you're still with me on this little journey, you'll have noticed that most house price measures are for the average, or mean. Let's take that at 200,000 - it's lower on some measures than others. So what are mean earnings? This release tells us (see p9) that they are 537.30 overall, 27,940, or 591.60, 30,763 for men only:

That gives price-earnings ratios of 7.2 and 6.5 respectively; not much different.

Posted by David Smith at August 9, 2007 09:25 PM

The journey is a fascinating one. Thanks for the info. I for one would like to think about this one and possibly revert when I've drunk less than three glasses.

Posted by T gumbrell at August 9, 2007 09:45 PM

t gumbrell,

"It's gotta be getting pretty tight for some"

I agree on this point, according to this* recent article, average rental yields in England are currently 5.42pc, so a BTL investor with a 90% mortgage would need to be paying less than 6% for the rent to cover the interest. I recently got 5.44% on a tracker, so we're perhaps half a percentage point away from your negative yield situation (on average; I accept that in some areas of the country the situation will be worse, some better).

"Foreclosures were caused by debtors being unable to cash flow the loans when rates rose above expectation."

True, but you're much less likely to foreclose if your property is worth more than the mortgage (you'd sell it yourself before it came to that).


Posted by Ed B at August 10, 2007 10:31 AM

David what do you make of todays billion dollar interventions by the various world banks? Does this impact your view of the current Sub prime situation in the US?

Posted by Ben M at August 11, 2007 01:30 AM

Ed B - you must be joking! I've been in property for the past 7 years (UK, then German), and it is extremely difficult to find a gross yield of 5%, let alone 5.42%. But, let's say you've got your 5.42%, well you still need to pay the following: letting agents (10%); Buildings insurance; if it's a flat you need to pay the service charge. On top of this you then need to factor in void periods, and then you need to set cash aside and put it into a sinking fund for repairs and maintenance (yes really!).

Once all costs are factored in, you will get a net yield of around 3% on average in the UK. A typical variable rate BTL loan will cost you 7%. But, you can equity release to make up the cash short falls you experience every month. You bury your head in the sand and think about all that capital appreciation. But then prices stabilise or fall a bit (horror!). You can't equity release to cover the negative yield. It all becomes too much hassle, and far too expensive....You think about decide to sell....

....but you find that you are not alone....there are many others like you...things get a little panicky....

Posted by t tgumbrell at August 11, 2007 06:32 PM

Ed B - I looked at the Telegraph article. Your words were misleading. You said 'according to this article....'. Actually the journalist was quoting Lee Grandin, the MD of Landlord Mortgages. You really should be more circumspect when choosing who to listen to. I mean come on - a BTL mortage company for info on rental yields?? Fancy a game of poker?

Posted by t tgumbrell at August 11, 2007 11:25 PM

t tgumbrell,
You got me on the source; I was in a rush and grabbed the first figure I could find. You may be right on the BTL situation, time will tell.

Posted by Ed B at August 13, 2007 10:25 AM

David and others,
Looks like some admissions are starting to be felt necessary in the context of the market turmoil.

This is from today's telegraph:
Ms Earley [Nationwide's chief Economist] said as the US has greater exposure than the UK to the sub-prime mortgage market, it was experiencing "more extreme" difficulties. She estimated that sub-prime mortgages account for "no more than 10pc" of the UK market.

What a bizarre statement. It wasn't long ago that such a public figure would have denied that a SP market even existed in the UK.

10% of the market!! That's a much higher figure than I expected to hear from a deeply dug in vested interest.

With our massive, self-certified BTL market on top of this SP market, we could well have a larger effective SP market than the US.

Posted by t tgumbrell at August 13, 2007 05:53 PM
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