Financial, Real Estate, Stock Markets Trends and Current Affairs

Who says only Americans are trying to delever?

Even with exposure to foreign events and insolvent counterparties at the top of every financial institution’s worry list for the rest of 2010, the microeconomic picture for debtors in the UK remains mediocre.  Americans were not the only ransacked with debt during the past decade, as Brits watched their securitized debt levels rise to incredible rates.  The Bank of England makes a point to state that without record low interest rates, defaults would be another issue for banks to look out for (interpreted: the Democratic People’s Republic of Korea will win the World Cup before the central bankers at the BoE even consider raising interest rates).  Soon after, they state that it would be easier to raise rates in times of robust growth than the uncertainty of current conditions, which is absolutely novel.

Domestic Credit:

• A majority of UK households have a large amount of equity in their home value
• Unsecured mortgages made up 2/3 of write offs since 2007, and even as they have stagnated, credit card write offs have increased to record highs
• The beginnings of a potential CRE resurgence in the UK have been limited to prime properties, with higher yield projects being shunned
• Even as prices are rising, they are still a third below 2007 peaks (and still probably overpriced if it is anything like the US CRE market)
• If tighter credit conditions prevent voluntary restructuring, CRE prices will fall further on corporate liquidations and forced foreclosures