The Bank of England said last week that "around 7%-11% of UK owner-occupiers with mortgages were in negative equity in the spring of 2009." There are 11.7 million outstanding mortgages in the UK, so that would give us between 800,000 and 1,300,000 in negative equity.
Lloyds/HBOS said back in February that about 16% of its borrowers were in negative equity. Lloyds/HBOS has 28% of the market, so whether you pro rate it up at 540,000 ÷ 8% or assume 11.7 million mortgages x 16%, it gives up a figure of about 1,900,000 in nequity.
Right. Lloyds/HBOS may have been hamming it up a bit in the hope of more bail-out money, and the Bank of England may have been playing it down a bit in order to boost confidence (which is part of their remit), but that's still one heck of a discrepancy.
Monday, 15 June 2009
OK. Who's lying to whom? And why?
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8 comments:
Or maybe Lloyds / HBOS has a different risk profile to the market overall?
They are all basing their figures on the fiction of a 'valuation'. A profesional opinion of what a property might fetch if offered on the open market. The bank may be using the 'forced sale value' that is a price that can be achieved and the sale completed in 6 weeks, usually about 75% of the market value.
As in all things the market will set the true price.
Given the effect that QE is having by sustaining house prices at unrealistic levels combined with below market interest rates, I'd have thought that in the real world, when tested they'll both be underesimates.
To back this up I have dealt with two mortgage enquiries in recent days where ambitious borrowers are seeking to borrow far beyond their means to repay (IMHO) and where I have found banks willing to lend.
This madness has to stop.
Obo, Lloyds TSB had a reputation for 'cautious' lending (especially compared to NR, B&B, HBOS) but the percentages for old Lloyds TSB borrowers (15%) and old HBOS borrowers (16.8%) are hardly different.
Maybe HSBC and Barclays weren't quite so reckless, but I'd expect Lloyds/HBOS to be somewhere in the middle.
Lola, the madness will stop, it's just a question of when.
"There are 11.7 oustanding mortgages in the UK"
...because the other twelve=million-ish have already been reposessed, right? ;-)
It wouldn't surprise me if this were partly an accounting thing - presumably Lloyds is required to use the most conservative price estimates to determine nequity, whereas the Bank of England can use the ones it thinks are most likely to be right...
JB, oops, I have amended.
I do not agree that lloyds has a reputation for 'cautoius lending'. They may have been able to work some PR magic so that is how it appears, but I have evidence in my files of people to whom LloydsTSB have leant money that thye should not. Plus they have their C&G subsidiary that was big in BtL and must have a shed load of below outstanding debt security. And they have been desparate to hurl money at Mrs Lola.
It'll be smoke and mirrors. They are all at it and none of them are what you might call sound, but they continue with the arrognat fiction of superiority.
To quote Prostetnic Vogon Jeltz again, "Death's too good for them".
L, the quoted stat's clearly suggest that Lloyds-TSB-C&G were just as bad as the rest (as you point out), but I was replying to Obo's query as to whether Lloyds were possibly worse.
The creativity of statistics, Mark.
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