Ratings agency wakes up, smells coffee

From FT Alphaville:

Nine UK building societies, including Nationwide, have been downgraded by Moody’s* – some by as much as four notches - amid concerns about their exposure to falling house prices and specialist mortgage loans. The ratings agency said it had made the cuts after conducting stress tests on how mutuals would perform against sharp falls of up to 60% in house prices**. Several societies, including Chelsea Building Society, may even challenge Moody’s on the downgrades.

* Don't forget that the ratings agencies were complicit in the credit/property price bubble by handing out triple-A ratings like confetti for all the 'mortgage back securities' that the banks and building societies were churning out.

** That's bearish, even by my standards. The full article in the FT itself refers to "a base case scenario of a 40 per cent fall in house prices from the peak of the boom", which seems 'about right'.

The first comment says it all:

About 3 years too late. I wonder if they will remember this in 15 years time when the housing market undergoes yet another round of overheating...