Musings of a London Property Search Agent

Nationwide published their House Price Index for November today with news that falls in the Property Market stabilised in November and that conditions were right for demand to rise again if the availability of credit improves.

Fionnuala Earley, Chief Economist of Nationwide comments:

“Turnover rates in the housing market have fallen to historic lows, even below the levels in the 1990s

when the economic conditions were worse than they are today. At the trough of the market in Q4 1990, interest rates were at 14% and there were almost double the number of unemployment claimants, yet a greater proportion of owner occupiers were taking out mortgages to move house. The significant difference today is the financial market shock which has led to the severe tightening of credit. In Q4 1990, 60% of first time buyers were taking out loans with LTVs above 90%, today the equivalent proportion is 14%. While this may reflect less desire on the part of borrowers to borrow at high LTV, especially given its higher cost, it also implies that part of the reduction in turnover today is likely to be due to the availability of finance at higher LTV.

€œNot all of the limits on lending will be due to the turmoil in the markets. Some will be due to more traditional underwriting criteria taking effect in a slowing economy with falling house prices and some will be due to more accurate pricing of risk. Nevertheless it is clear that the uncertainties in the financial markets are still affecting the availability and costs of funds in the markets as banks deleverage, and this has an effect on borrowers. If funds once again became more freely flowing as a result of Crosby€™s recommendations, this could stimulate levels of activity in the market and thus help to promote a swifter recovery. While there is still a great deal of uncertainty about the appetite of investors for mortgage backed securities, a government guarantee may be the catalyst required to restart this market and begin to add liquidity, especially as affordability is now improving.€

 In short - blame the bankers who bought into sub-prime.  There is still demand for UK property, and homes in the South East in particular.  If the credit crunch eases then so will the woes of the housing market.  This London Property Search Agent is optimistic about property prices in the medium term - our advice is to buy now if you canraise the funds.

Technorati Tags: affects of the financial crisis on the housing market, credit crunch, House Prices, London Property Search Agent

Tags: affects of the financial crisis on the housing market, credit crunch, House Prices, London Property Search Agent

Musings of a London Property Search Agent

In a speech to the European Business School in London given by Sir John Gieve, Deputy Governor of the Bank of England, Sir John said that complete seizure in the money markets had been averted but warned that we are at the beginning of a recession and that further action may be necessary.  He cited hedge funds as an area of concern, although banks are now more secure following the national Bank’s pledge to underwrite capital issuance of £50 billion which has underpinned confidence.

In addition to considering the causes of the current global financial turmoil which has led to recession in the US, the UK and several other advanced Western economies, the Deputy Govenor set out 4 lessons for the medium term, declaring the need for “… far better coordination of policy internationally and the need for some new policy instruments alongside interest rates to dampen the financial cycle.”

 1. Closer International Co-ordination of macroeconomic policy

International cooperation at global level is necessary in a global economy.  Sir John reiterated that cooperation among members of the EU and G7 was not wide enough and welcomed the G20 and the IMF as playing key parts in macroeconomic coordination, citing inflationary oil prices as an external event beyond the reach of national policy makers but not of the global economy.

2. Better ground rules for cross-border financial crises

“In particular emergencies there are often different national interests at stake and the sheer pressure of events can limit cross-border consultation.  However, if we do not tackle this we will see the growth of national restrictions on the terms on which cross-border operations are permitted - in terms of capital, liquidity and legal structure - and that could have great economic costs.”

3. Strengthening banks’ resilience

There is a need for agreement on liquidity and capital requirements of banks.  ” The FSA is developing proposals for UK which will deliver tougher standards.  But we are pressing for international agreement in the Basel Committee.  Events also brought home the need for a fundamental review of both the amount and definition of capital requirements.”

4. Developing macro-prudential tools

The Deputy Governor outlined three schemes which could decrease the impact of future financial crises, highlighting the need to “bridge the gap between macroeconomic policy and the regulation of individual firms.”

He continued, “We need a third club in our bag which can directly dampen the financial cycle.  This is needed both for financial stability and for wider economic management.”

“But we have seen how the financial sector can drive the wider business cycle, by becoming over-confident in the upswing and over-constrained (by lack of financial resources - capital and liquidity) in the downswing.  It seems to me that mechanisms which oblige banks to build up resources in good times can serve a second useful purpose of dampening the economic cycle.  I think of this as ‘protecting the cycle form banks’.”

In brief the 3 schemes described were

• The Spanish System of dynamic provisions which requires banks to build a general reserve that can be drawn on in downturns
• Growth related capital requirements which make it more expensive for banks to expand their balance sheets faster than normal when confidence is high and could be a useful means of dampening banks’ contribuition  to the business cycle
• Less stable sources of funding could be treated as an added risk factor in assessing a banks liquidity needs.

http://www.bankofengland.co.uk/publications/speeches/2008/speech367.pdf

This London Property Search Agent is not daunted by these comments as buyers can find bargains with the right advice and support - call us!

Technorati Tags: Averting Financial Meltdown, Banks, credit crunch, Financial Crisis, liquidity, London Property Search Agent, recession

Tags: Averting Financial Meltdown, Banks, credit crunch, Financial Crisis, liquidity, London Property Search Agent, recession

Musings of a London Property Finder

Mortgage approvals for house purchases have risen for the first time in over a year following a record low in August.  The summer in general and August in particular are always slow in the property world but figures released from the Bank of England today show that the balance of money paid off mortgages outweighed those taking them out for the first time since the 90s.

Mortgage approvals are still approximately a third of rates before the credit crunch and the volumes of houses purchased is down 50%.

This glimmer of good news is not expected to affect the expected downward trend in interest rates with some expecting rates to fall to 2.5% by this time next year.  Buy while the going is good says the London Property Finder.

Technorati Tags: credit crunch, house purchases, Interest Rates, Interest Rates Fall, London Property Finder, Morgage approvals

Tags: credit crunch, house purchases, Interest Rates, Interest Rates Fall, London Property Finder, Morgage approvals