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Now Alliance and Leicester profits down 34% YoY. Write down of $185m subprime assets.
Small fry compared to some, but it shows the pain is widespread.
Their response will be:
-higher mortgage rates
-smaller lending multiples
-higher loan-to-value requirements
-overall reduced mortgage lending
so lower lending will lead to house price falls, more defaults, less lending, house price falls, more defaults...
Bradford and Bingley's announcement was at least as bad, with the same consequences. Would you deposit cash in any of these institutions?
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Before people have a go at me for cutting and pasteing, I'm just trying to keep the thread up to date.
Far from getting better, the credit crunch is spreading and worsening by the day. People need to understand that Spain does not live in isolation and is going to be very badly affected by all this.
We are not now far from the stage that banks will be unable to lend atall, even to customers with good credit. This is because banks are forced to maintain what is called capital adequacy ratios, which simply means that they have to have a certain level of cash reserves in order to make new loans. Once they are hit with sufficient losses then these cash reserves are drained and they cannot make new loans.
This is happening now and lenders are rushing to withdraw products and tighten lending so that fewer and fewer loans are written.
The crazy prices in Spain were a function of easy relaxed lending, that was the single most important ingrediant in this bubble.
Imagine what property will be worth once mortgage finance is not available.
I am reading more and more about "problems" with bank valuations. This is the clue to what is coming next.
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Fed forecasts inflation, unemployment
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WASHINGTON (AP) - The Federal Reserve on Wednesday lowered its
projection for economic growth this year, citing damage from the double blows of
a housing slump and credit crunch. It said it also expects higher unemployment
and inflation.
The updated forecasts come amid worry by Federal Reserve Chairman Ben
Bernanke and his colleagues that the economy could continue to weaken, even
after their aggressive interest rate cuts in January, according to minutes of
those private deliberations released Wednesday.
"With no signs of stabilization in the housing sector and with financial
conditions not yet stabilized, the committee agreed that downside risks to
growth would remain even after this action," minutes of the Fed's Jan. 29-30
closed door meeting showed.
The Fed at that session voted to cut a key interest rate by one-half
percentage point to 3 percent at that meeting. Just eight day earlier, the Fed,
in an emergency session, slashed its rate by a rare three-quarters percentage
point. The two rate cuts together marked the most dramatic rate reductions in a
single month by the Fed in a quarter century.
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From the last Bank of England MPC minutes
David “Danny” Blanchflower voted for a jumbo half point cut in UK rates last time around, say reports. His view being the UK faces a “very sharp slowdown” in growth and a significant response is needed.
Another member of the MPC, Kate Barker, is in the news too. She was talking and when she talks we listen. She’s the Bank of England’s housing market expert and last night she was addressing the worthies of the North Staffordshire Chamber of Commerce. She spelled out the threat to property prices from the credit crunch.
"If credit tightening were to prove more severe than in the MPC's present central projection, leading to a significant fall in lending to households and companies, this could prompt a further decline in property values.
"The consequent adverse impact on growth could prove difficult to turn around quickly, potentially resulting in a protracted period of low output growth and below target inflation."
Her comments coincide with the news that four lenders are pulling their 100% mortgage deals. Maybe Danny had a point.
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Countrywide delinquency rate hits 7.47%
Mortgage lender says delinquencies on borrowers' loan payments increased in January as foreclosure rates remain steady.
(AP) -- Countrywide Financial, the nation's largest mortgage lender, says delinquencies and foreclosures continued to rise in January.
Delinquencies in Countrywide's servicing portfolio increased to 7.47% in January, up from 7.2% the previous month and 4.32% in January 2007. Loan servicers collect mortgage payments and distribute them to the owners of the mortgages.
Foreclosure rates as a percentage of unpaid principal balance increased to 1.48% in January, up from 1.44% in December and 0.77% in January 2007.
Calabasas, Calif.-based Countrywide services mortgages totaling about $1.48 trillion
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Yes we have even had estate agents knocking on the door asking if we are likely to sell in the near future, we keep getting all their flyers, nearly every week their is something fron one of them. It seems what houses are for sale go pretty quickly.  Pat
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I see in some areas of the UK estate agents are advertising for properties to sell. If there is a shortage of property available surely prices should hold up o.k.
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If you're going through hell keep on going, you might get out before the devil even knows you're there.
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Taking TJ a long time to drink that cup of tea.
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"Bricks and Mortar was always what prospective farthers-in-law would tell me whilst warming their arses and flexing their braces in front of the fire. They never said buy gold, though their daughters did!"
Gillespie,
Taken your advice, had some spare cash so Wickes are delivering 2 packs of bricks, 3 bags cement and 1 of sand tomorrow, how long should I keep them before selling on and making a profit?
Kelju
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Tj,
When i said about work i was refering to both of us in the past tense.
I obviously know you live in Spain,i was talking about our similarities not our differences..................
As i said we obviously do have the same ideals at heart.
If us average Joe's knew exactly what was happening in central government do you not think we would be very concerned and probably never sleep again,some times ignorance is bliss........
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www.taylorlandandpropertygroup.co.uk
still here after all these years!
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"I was the same as you in the UK work work work,2 cars,3 cars,big house,bigger house......................."
Oh dear final post on this subject then I must get that cup of tea.
Its understanding the monetary system that enables me to retire to Spain and put my feet up in the sun. Do you see me work work work, 2cars 3cars etc - I'm retired from 9-5. I don't have to work, but chose to do lots of things to keep me active and content.
Precisely because I understand the way things work in this crooked world, I am doing the very opposite of work work work. I can watch my girls grow up and spend my time with my family enjoying Spain and those other things that your rightly say are so valuable. last year we travelled across Western australia in a campervan (mad or what) and two years before that when we had no kids, we travelled around the world and ended up in Thailand.
I'm not trying to be smug, just trying to help, because if everyone understood the system, then we would all vote in some decent politicians and have within a few years a much much better standard of living. There would be no more inflation and people could get off the rat race.
Instead the average Joe knows next to nothing about economics, so we have clowns like Bush, Brown and Zapatero that will before they are finished have most of us in abject poverty.
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