More Grim Words on the State of the UK Housing Market

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I had to feature this article from the Guardian not only for its content but for its particularly vivid writing .But the specter of a market implosion is quite stirring, in a perverse way. Just get a load of the headline: “Wrecking ball hits housing market“.

From the Guardian:

Jeepers. What a way to start a week. Any remaining doubt that the housing market is in freefall was blown away by figures showing a collapse in mortgage approvals, an unprecedented rights issue repricing and profits warning from Bradford & Bingley – and an increase in the Nationwide’s fixed-rate mortgages.

With house prices falling, there is a full-scale retreat from the mortgage market. Would-be homebuyers don’t want to buy something they might get much cheaper next year, while lenders won’t lend on assets that might soon be under water. None of the Nationwide’s fixes are available below 6%, more than a full point above base rates. The squeeze is on.

In the early stages of a housing market slump, activity indicators are often more relevant than price data, which tends to lag. So when mortgage approvals fall by half and net new home reservations are down by three-quarters there is a problem. Right now the data is telling us just one thing, that the housing market is in meltdown.

Bradford & Bingley, meanwhile, is a corporate disaster area. Seven weeks ago it reckoned it didn’t need a rights issue. Two weeks ago it asked for £300m at a hugely discounted 82p. Investors, however, were assured that trading was fine.

Yesterday B&B’s chairman, Rod Kent, admitted trading was anything but fine. Arrears are mounting, margins are being eroded, the company is about to plunge into the red and there is no sign of improvement. Private equity group TPG has been lured in to take a 23% stake and the rights price slashed to 55p

For those not familiar with the struggling Bradford & Bingley, a brief business description from its website:

Bradford & Bingley is a UK-based financial services institution, focused on providing specialist mortgages and savings products.

Our residential lending activity focuses on a range of niche areas providing mortgages for individuals who need a more specialist product than those available in the mainstream market.

In other words, they’ve managed to put themselves at the epicenter of the upheaval.

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  1. Richard Kline

    Not quite China Syndrome, UK res property, but containment in the reactor core is breached, and the facility floor has the consistency of liquifying gorgonzola. Pity those helicopters chuffing about are hoisting paper rather than cement. We need _concrete_ solutions, boys.

  2. Your prose is nice but hard to read :-)

    Dear Yves,

    May I draw your attention to the fact that your blog has many non-English speaking readers? Although I am fluent, I sometimes find your prose hard to decipher. Here is a recent example :

    “It appears the US central bank got taken to the woodshed at a conference hosted by the New York Fed for overly aggressive rate cuts, but despite jeering from the peanut gallery, it looks likely that the Fed will hold pat until at least the fall.”

    This is the ransom of success! I hope you won’t find this too frustrating.

    A loyal NC reader

  3. Yves Smith

    That sentence had problems even in English. I used a mixed metaphor. FYI, “taken to the woodshed” is a colorful way of saying “spanked”. The “peanut gallery” is the cheapest seating in a theater. People who sit in the peanut gallery aren’t important. So even though the Fed got a lot of criticism at its conference, it wasn’t from important people.

    But to put two images like that in one paragraph, much the less one sentence, is too much.

  4. daveNYC

    Bah, that barely even qualifies to show up on the mixed metaphor index. What you’d need is something like “the tentacles from the US housing crash are derailing an already sinking UK market and taking it behind the woodshed”.

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