Black Friday!

[tricky]

A broker told me today that I could get 80% LVR on an Auckland CBD apartment.
Doesn't sound like a credit squeeze to me.

[muppet]

U.K. August Mortgage Approvals Fall to Four-Month Low (Update2)

By Brian Swint

Oct. 1 (Bloomberg) -- U.K. banks approved the fewest mortgages in four months in August as borrowing costs increased, a sign demand from buyers in the residential property market may start to slow.

Lenders granted 109,000 loans for house purchase, the least since April, the Bank of England said in London today. Economists forecast 110,000, according to the median of 24 estimates in a Bloomberg survey. House prices stagnated in September for a second month, a separate report showed.

Borrowing rates for home loans are rising after the central bank lifted its main interest rate to a six-year high in July and credit costs surged, forcing a bailout of mortgage lender Northern Rock Plc last month. Today's report adds to signs that the property market is cooling as consumers pay back a record 1.4 trillion pounds ($2.9 trillion) of debt.

``There are plenty more drops to come,'' said Alan Clarke, an economist at BNP Paribas in London. ``This is entirely due to higher interest rates. We see the Bank of England staying on hold.''

The net value of lending secured on homes fell to 8.5 billion pounds, the lowest since February 2006, the central bank said. Overall net lending dropped to 9.5 billion pounds from 10 billion pounds in July.

Other Borrowing

Britons borrowed 10 billion pounds against the value of their homes in the second quarter, the least since the third quarter of 2005, the bank said today in a separate report. So- called housing equity withdrawal fell to 4.5 percent of post-tax income from 6 percent in the first three months of 2007.

``The marked retreat in housing equity withdrawal in the second quarter indicates that higher mortgage rates and increasing doubts about future house-price strength is diluting the attractiveness of such action,'' said Howard Archer, an economist at Global Insight in London.

Higher rates may hamper household spending after a U.S. housing slump sparked a global credit squeeze. The London interbank offered rate that banks charge each other for three- month loans in pounds reached as high as 6.904 percent on Sept. 11, the widest gap from the central bank's benchmark rate in at least two decades. The rate was at 6.3 percent on Sept. 28.

Banks such as Abbey, the second-largest U.K. mortgage lender, are passing the higher rates onto their customers. The average rate on a mortgage fixed for two years, the most popular type, rose to a seven-year high of 6.58 percent in August for borrowers with a 5 percent deposit on their homes, the Bank of England reported Sept. 11.

House Prices

The housing market has shown mixed signals since the onset of the credit slump. Prices rose 0.7 percent in September, the fastest pace in three months, Nationwide Building Society said Sept. 27. A separate Hometrack Ltd. survey released today showed average house prices stayed unchanged at 176,300 pounds ($358,000) in September.

Consumer spending has boosted U.K. expansion and has yet to show signs of slowing. Gross domestic product growth quickened an annual 3.1 percent in the second quarter, putting it on course for the best performance in three years, a government report showed Sept. 26. Consumption rose 0.8 percent in the period, the most since 2006.

Consumer confidence still fell to the lowest in six months after a run on Northern Rock, which sought a bailout from the central bank, a GfK NOP Ltd. survey showed Sept. 28. Only a government guarantee ended the panic, which led former policy maker Richard Lambert to liken Britain to a ``banana republic'' in a Sept. 26 speech.

Net consumer credit fell to 1 billion pounds in August from 1.1 billion pounds the previous month, the central bank said. Net credit card lending rose by 75 million pounds, the least since May. Borrowing on personal loans and overdrafts increased by 928 million pounds, the most in three months, today's report showed.

Policy makers will keep the benchmark rate unchanged at the current 5.75 percent on Oct. 4, according to the median forecast of 60 economists in a Bloomberg News survey.

http://www.bloomberg.com/apps/news?p...fer=realestate

[ream]

Can verify UK rates rising sharply

We still have borrowings against a UK property with a 2nd tier lender (think it was low-doc, due to being self-employed & about to leave the country) - they just put their rate up something in the order of 1% in one hit a couple weeks ago which is unheard of as it would be here. Caused a £100+ jump in our monthly IO payments which made me look a little closer than normal!

Ream

[muppet]

Banks admit to problems

Banks admit to problems

Eric Dash
October 3, 2007

NEW YORK: Wall Street's banking giants have started to admit their problems, which began in the mortgage-lending business and led to a season of wild stockmarket swings.

The country's biggest bank, Citigroup, will write off $US5.9 billion ($6.6 billion) in the third quarter, causing its profit to drop 60 per cent from a year earlier. Earlier Europe's biggest bank, UBS, said it had written down $US3.4 billion in the value of mortgage-backed securities and would suffer a loss in the quarter. Other banks, including Merrill Lynch and Bank of America, have issued similar warnings.

Investors took the disclosures as a sign that the worst may be over for the banks and that any losses may be contained.

At Citigroup, the announcement again raised questions about the future of its chief executive, Charles Prince.

Still, all three major markets indexes closed higher on Monday. The Dow Jones set a record, rising 191.92 points to 14,087.55.

Analysts cautioned, however, that serious problems remained in the housing market and questioned whether consumer spending could continue to carry the broader economy.

"It's a clean-up quarter," said Michael Mayo, a financial services analyst at Deutsche Bank. "The industry cleaned up from the collapse of the technology bubble earlier this decade, from commercial real estate in the early 1990s and from Third World debt in the late 1980s.

"This quarter has the potential for a similar cleansing - only this time from private equity loans and mortgages."

Banks and brokerage firms have been contending with the twin problems of the mortgage meltdown and credit market collapse in July and August. As mortgages to home buyers with shaky credit soured, the fallout sent shock waves through the financial system. Investors lost faith in mortgage-backed bonds and other complex securities, causing prices to plummet. Demand for high-yield loans used to finance buy-out deals all but dried up, leaving banks faced with the possibility of holding billions of dollars in debt. And higher financing costs and tighter lending terms caused mortgage underwriting to grind to a halt.

Investors, including many hedge funds, suffered heavy losses. Now, Wall Street is also paying the piper. The poor results were not unexpected. In September, several brokerage firms - including Bear Stearns, Lehman Brothers, and Morgan Stanley - reported lower earnings. Only Goldman Sachs's earnings rose - and even it was not untouched by the jittery markets.

"Is it Wall Street taking its medicine?" said Brad Hintz, a financial services analyst at Sanford C Bernstein. "No question about it."

Banks are writing down the value of billions of dollars in buy-out loans, weathering heavy trading losses and setting aside hundreds of millions of dollars to protect against future losses.

But cleaning up their balance sheets only solved half the problem, Mr Hintz said. In subsequent quarters, banks are likely to generate less from advising on mergers and acquisitions as the buy-out boom slows. And they must replace the income from subprime mortgages, a market that could take years to recover.

"It is going to be very painful for the firms that have a lot of mortgage exposure and it has the broader effect on the overall economy," Mr Hintz said.

http://www.smh.com.au/news/business/banks-admit-to-problems/2007/10/02/1191091114429.html

[OllyN]

Another One Bites The Dust

Another finance company in trouble
NZPA | Thursday, 4 October 2007

Another finance company has hit trouble, with the receivership of Auckland-based financier Clegg and Co Finance which has left little in the way of shareholders' funds.
Brian Mayo-Smith and Shaun Adams of BDO Spicers have been appointed receivers after Clegg and Co told the Covenant Trustee Company on September 27 that its trust deed had been breached to a "significant extent".
Covenant Trustee Co ordered the receivership after Clegg and Co directors and shareholders were unable to rectify the breach of the company's related party loan restriction clause, Covenant managing director Graham Miller said.
"In Covenant Trustee Company's view, the level of provisioning required against this Related Party debt means that Clegg & Co Finance has minimal if any residual shareholders funds," Mr Miller said.
Clegg and Co Finance was founded by Brian Clegg in April 2002, and finances commercial plant finance leases and other secured lending contracts, according to the company's web site.
Mr Clegg had earlier set up Classic Finance in 1995 to finance hire purchases and other secured lending, mainly second mortgages.
Nine finance firms have already collapsed in 16 months, owing investors $1.2 billion.

[Perry]

It's very difficult to sort out scare-mongering and conspiracy
theories from what's actually going on. For months, now,
lurid predictions of 'melt-downs' of one sort or another have
been assaulting us through every possible variety of alternate
media and their correspondents.

Certainly, the USA has been the primary focus in the last
many months. The CIA alleges that the USA national debt
is now $ -862,300,000,000.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html
(NZ is $ -7,944,000,000, while Communist China is
supposedly $ 179,100,000,000.)

When the USA economy sneezes, everyone else catches
a cold - so the old saying goes. Has anyone noticed any
restrictions on any form of finance in NZ?

How many PT forumites maintain some sort of diary with pop-
up reminders, on their computer? I do. I've therefore made a note
in that software to pop-up on April Fool's Day 2008, to remind me
to remind all of us to look back and recall all those 1 October
predictions and other ebony Friday forecasts, and compare it
with what we see all around us on 1 April 2008.

That's presuming we still have computers, electricity, and Internet
connections, of course.

Perry

[tricky]

... and recall all those 1 October predictions and other ebony Friday forecasts, and compare it with what we see all around us on 1 April 2008.
That's presuming we still have computers, electricity, and Internet
connections, of course.

Perry

Sheep will still be meeting other sheep and doing what sheep do.
Cows will still be making milk.
The sun will still come up in the mornings.
And men will still be claiming the end is nigh.

[Perry]

Ahhh . . . . the end of what, I wonder?

[Commercial Dan]

The subprime crisis has only just begun...it will last for at least a year and get worse, there are so many securities and companies tied up in it all.

[Josko]

Why would anyone interpret the doom and gloom and those advocating it as the END of the world?

It certainly is the end, end of anyone able to make money out of any purchase, end or anyone being able to do do-ups and make a certain profit, end of trading high margins, it is the end for many of these certainties, and it certainly is the end of the boom cycle.

So not sure what others think is being proposed with these doom and gloom announcements, however you'd be a foolish to think anything less or anything more.

[tricky]

Almost gone?

Latest news item:

http://www.telstraclear.co.nz/newsfeed/news_item.cfm?id=130952

Another finance company is in strife.

Broadlands Finance has confirmed it has laid off staff in an attempt to reduce overheads.

General manager Rudi Kats says the company will also reassess its lending activities because of the current environment. He says a management team will review lending activities and opportunities on a month by month basis.

Mr Kats says through no fault of their own, good, loyal and committed people are now without employment.

[cube]

Hi tricky,

It helps new sources protect their copyright (and stops PT getting in to trouble) if you can provide a link to stories from other sources.

Thanks

cube

[Perry]

He says a management team will review lending
activities and opportunities on a month by month basis.

That sounds so sick, when considered with the
other pronouncements.

I wonder if it could be re-phrased:

He says a management team will review lending activities
and opportunities [to maintain management positions at
the expense of customer service staff] on a month by
month basis.

[Davo36]

I remember a company called Broadlands going under in the 80s.

Are they related at all?

[revdev]

Asset pushes debenture rates to record high

From: http://www.stuff.co.nz/4237222a13.html

Asset pushes debenture rates to record high

A high-water mark has been set in the finance company debenture market with Asset Finance lifting its top rate to 12.25%.

The move comes a week after Finance Direct set the previous top mark of 12% for 12 months.

Clive George from Asset Finance said the firm had an average maturity profile of 31 months on its $21.5 million of debenture stock and so did not face the liquidity problems that other finance companies faced, but said that it was keen to keep borrowing long.

"We had to remain on par with the industry," George said. "Let's face it, the perception today is that if you haven't got a rating, you are not any good, which is a joke."

He admitted Asset Finance, which had 8.5% of loans in arrears by three months or more at March 31 compared to 3.09% in March last year, would struggle to get a good rating from international ratings agencies such as Standard & Poor's.

George also predicted that though things have been bad for finance company investors, worse was to come.

"I honestly believe that the turmoil we have had to date hasn't really started yet."

He said rumours around a number of other finance companies were worrying.

Instant Finance chief executive Richard de Latour, who also boosted top rates last week to 11.25%, said: "It is clear the industry is not offering fair rates."

He said when Instant Finance started offering debentures in July 2003, the margins over the banks that investors could expect were around 3%. That narrowed as finance companies came into vogue.

Just how much finance companies should be paying investors is debatable. Instant Finance, for example, does not disclose the interest rate at which it has secured a funding line from hedge fund Fortress. While the funding line does help secure the business against its funding drying up, it also provides an indication of what savvy investors demand for the risk of lending to finance companies.

Capital & Merchant Finance, for example, is paying 13% floating to Fortress, while debenture investors are being offered just 9.6% for two-year debenture investments, and Fortress ranks ahead of debenture holders should the company go bust.

The owners of Instant Finance, which is rated B3 by Kiwi ratings agency Axis, are also getting preferential rates over the $54 million of debenture investments.

According to its financial statements to 31 March, 2007, it was paying debenture investors 9.24%, but shareholder advances to Instant Finance are paid 15%, and their money is available in periods from on call to 90 days, unlike the debenture investments which can only be accessed when they mature.

Only one other finance company is paying over 11%, Geneva Finance, which last week had its credit rating downgraded by Standard & Poor's from B+ (sub-investment grade) to B-.

The firm, which has reduced its lending activity, is now offering 11% for two-year debentures and 11.35% for three-year debenture investments.