Europa Mortgages Worldwide

Spain's consumers lose heart

2011-01-05T07:50:00.000-08:00

A story from Reuters earlier today

Spain's key services sector --
more than 60 percent of the economy -- shrank at its fastest
pace in a year in December when consumer sentiment slid anew,
overshadowing an above-expectation rise in industrial output. Since Spain's property bubble burst in 2008 unemployment has
soared and increasingly gloomy consumers have abandoned the high
streets and restaurants, hitting the key services sector and
reinforcing worries over the economy's ability to recovery. "The headline PMI is consistent with stagnant growth. Our
view remains that Spain will fall back into recession this year
and, even if it doesn't, growth will be worse than government
forecasts," Capital Economics economist Ben May said. The euro zone debt crisis, which gained pace in November
after Ireland was forced to seek an EU/IMF backed bailout, has
stunted a recovery in the blocs' peripheral countries and
highlighted their disparity with the core economies.
"Near-record growth in Germany and strong expansion in
France contrasted with a collapse in growth in Italy to
near-stagnation and increased rates of decline in both Spain and
Ireland," said Chris Williamson, chief economist at Markit. Investor concern the Spanish economy will be unable to
restart after stalling last year following a prolonged recession
has pushed up bond yields and fuelled expectations the
government will be forced to apply for EU/IMF aid. The premium investors demand to hold Spanish debt over
German Bunds was around 244 basis points on Wednesday, below
euro-era highs touched at the end of last year but a long way
from the around 70 bps before the euro debt crisis began.
Markit's purchasing managers' index (PMI) of Spain's
services companies was below the 50 mark which divides growth
from contraction for the fifth straight month in December,
showing the economy is still struggling. November calendar-adjusted output rose 2.3 percent, the
National Statistics Institute said, far above a Reuters poll of
-3.4 percent, supporting government hopes of fourth quarter
growth, but clouded by continued gloom from consumers.
CONFIDENCE FLAGS Consumer confidence fell to 64.6 points in December, down
from 70 points a month earlier and the lowest recorded level
since May 2009, the Official Credit Institute (ICO) said on
Wednesday. Overall confidence was dragged down by a deterioration in
sentiment toward the current economic situation and expectations
for the economy going forward, ICO said. Prime Minister Jose Luis Rodriguez Zapatero has said the
country will beat public deficit targets of 9.3 percent of gross
domestic product and that the economy will grow in the fourth
quarter of the year. The government expects the economy to have shrunk 0.3
percent in 2010 and to grow 1.3 percent this year, a forecast
considered optimistic by many economists. November industrial output was boosted by the energy
component, which rose 7.7 percent year on year and was probably
lifted by harsh weather conditions, economists noted. But analysts were focused on the way shoppers were keeping a
tight hold on their purse strings. "PMI services is much the same story as we had on the
consumer component in industrial production, which is that
spending is constrained by the fiscal retrenchment and this is
reflected in the services component," economist at Deutsche Bank
Gilles Moec said. The Socialists have passed austerity measures last year
aimed at saving more than 50 billion euros ($66.40 billion) but
have said short-term growth would be boosted by rising exports. "Capital goods and intermediate goods, normally driven by
exports, are doing fine and this is perfectly consistent with
news on exports and the rebound in manufacturing PMI we had
earlier this week," Moec said.

Why mortgages might be Spain’s next headache

2010-12-27T16:25:00.000-08:00

Are mortgages the next headache for Spanish banks? Regulators think the country’s 630 billion euro home loan market can survive the slump relatively unscathed, just as in the last real estate crisis of 1992-1993. Spanish banks’ biggest problem is bad loans made to real estate developers. But it would be optimistic to assume that mortgages will emerge unscathed.

In a recent presentation, the Bank of Spain pointed out that conditions in 1993 were tougher than they are now.
Unemployment hit 24 percent and interest rates soared to 13.9 percent, compared to 2.6 percent today. Even then, only 4 percent of mortgages went sour. And banks were able to sell repossessed properties after the bust without incurring losses.

There are grounds for optimism. Despite falling property prices, Spanish home loans are on average worth just 62 percent of the value of the property. These loans are recourse, making it harder for borrowers to walk away. Spanish families will often help overextended homeowners keep up their mortgage payments. This is reflected in banks’ data: the proportion of mortgages classed as non-performing has fallen to just 2.6 percent.

But today’s real estate bust is worse than in 1993. Spain started building 760,000 new homes in 2006 — almost four times as many as in 1992, even though the population has grown by just 13.5 percent. Most analysts predict Spanish house prices will fall 25 percent from the peak, twice the 12.8 percent drop to date. According to RR Acuna, a consultancy, Spain has 1.5 million unsold homes — about 6 percent of the total stock. These will act as a drag on prices, making it hard for banks to sell foreclosed homes at a profit. Moreover, households are more indebted than in 1993.

How bad could it get? If delinquencies on mortgages reached, say, twice the 1993 peak, banks would have 50 billion euros of troubled loans. Even then, this would be less of a headache than lenders’ 180 billion euros of potentially troubled exposure to construction and commercial real estate. Eventual losses would also be much smaller. Nevertheless, it’s hard to argue that mortgages will not be a problem.

Spain must act to capitalize banks

2010-12-27T15:20:00.000-08:00

The last time

2010-12-27T15:15:00.000-08:00

This is the last time I'm going to get caught up in the great Christmas shopping scam. The retailers have this perfect date of the 25th December which forces the vast majority of people to spend hundreds of pounds on Christmas gifts. And then, on the 26th or shortly after, prices drop through the floor, and we are bombarded with ads for 40 or 50% off. In our local shopping centre today, I was completely pissed off with seeing things that I had paid full price for, at 50% a few days later. The worse thing is, we know this is going to happen, and still most of us fall for it. Not me, not again next year anyway.....

More bloody snow

2010-12-20T11:26:00.000-08:00

So, here we are, in the last few working days up to Christmas, and the whole bloody country seems to have ground to a halt again because of the snow.
I live near Gatwick and the news reports are full of stories of people stranded at the airports either trying to get away or trying to get home somewhere before Christmas. The news channels must be loving it - they can spend the whole day going live to helicopter shots over the M25 or Gatwick.
Also, we hear that retailers have seen their share prices fall, as people just haven't been able to get to the shops. One wonders what will happen to the boxing day sales if people haven't been able to get to the shops before Christmas day.
Of course, Christmas is the ultimate shopping scam anyway, in terms of forcing people to buy before the 25th, even though we know that prices will be lower on the 26th.
In economic news we hear from the CBI that they have scaled down their estimate for 1st quarter growth to an insipid 0.2%, with not much improvement through 2012. There also seems to be some expectation that interest rates will have to rise, to help curb inflation. Given that we are all going to be hit by higher VAT and other increases next year, that's hardly going to be welcome news. In terms of people with Spanish mortgages or other euro mortgages, there may be a small upside as the pound may strengthen with higher interest rates. Whatever happens, it looks like being a tough 2011.....

Poor sales to non-residents in Spain

2010-12-19T10:11:00.000-08:00

Amazing property sales figures for the last quarter show that the number of properties sold to non-residents was, wait for it, 490. Yes, 490, in the whole of Spain!
I would imagine that a few years ago there would have been some large agents that would have expected to sell 500 units in a quarter!
So it seems that, even with falling prices (supposedly) the foreign buyers are hardly falling over themselves to buy places in Spain.
Clearly everyone seems to have their own economic problems at home, and the outlook for Spain seems to be shaky at best.
Also, although the banks can be identified as being the cause of a lot of problems with their easy lending practices, the current best offer of 60% LTV is not really very enticing for non-cash buyers. You are going to need 40% deposit plus up to 15% to cover all the costs - about 55% of the total purchase price. It's not difficult to see why the sales are so low.

Explaining the Sub-prime mortgage mess

2010-12-19T03:40:00.000-08:00

How the Irish Bailout works

2010-12-02T11:32:00.000-08:00

It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt and everybody lives on credit.
On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note onthe desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub.The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.The hotel proprietor then places the €100 note back on thecounter so the rich traveller will not suspect anything.
At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money and leaves town.No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
And that,ladies and gentlemen, is how the bailout package works.

Spains banks seen as weak links

2010-12-01T13:45:00.000-08:00

(Reuters) - Mounting bad loans, competition for funds and exposure to wobbly Portugal make Spain's banks a potential liability as the country fights to avoid an Ireland-style bailout.
A burst property bubble also weighs on the sector, but the immediate worry is over the spring of next year when both the banks and the government will be in the market for a combined 50 billion euros ($66 billion) of funding.
"Problems may well arise when banks need to turn over debt at the same time as the government if confidence remains low," said Javier Bernat, analyst at Caja Madrid.
A wave of consolidation and conservative rules have supported the banks so far, but after Ireland accepted an 85 billion euro aid package, investors are turning their eyes to Portugal and Spain.
In the larger economy, mid-size banks such as Banco Sabadell
and Banco Pastor are seen as potentially the most vulnerable.
They were frozen out of European interbank markets earlier this year, and are not as diversified as global giants BBVA and Santander.
Capital requirements for Spanish banks have traditionally been more stringent than in other countries and the average core Tier 1 capital of the sector was 7.7 percent under a crisis scenario in July's Europe-wide stress tests.
But the bar has been raised for all banks since then, as new capital rules have been agreed, leaving Spanish banks looking less well capitalized than many international rivals.
The weakest link in Spain's banking system are regionally focused savings banks -- who had an average core Tier 1 capital ratio of only 5.5 percent in the stress tests. They have already gone through a forced consolidation process that has cost the government 15 billion euros in credit lines.
Shares in Santander, the euro zone's biggest bank, sagged 3 percent to an 18-month low on Tuesday as worries about the sector grew.
Spain's economy is larger than those of fellow euro zone peripheral countries Ireland, Greece and Portugal combined, and if it spirals into a debt crisis despite progress cutting its budget deficit, a bailout would strain the European Union's safety net.
With the economy stagnant and spending cuts landing, market jitters over possible bank funding problems have pushed up financing costs for Spain to euro-zone lifetime highs of about 5.4 percent for 10-year sovereign bonds.
Another source of concern is heavy exposure to Portugal, which is seen as the next euro zone trouble spot. Spanish banks had a $108 billion exposure to Portugal at the end of March, according to Bank of International Settlements data.

Is Eurozone heading for triple meltdown again ?

2010-11-16T02:09:00.000-08:00

News stories and podcasts are very much focussed on happenings in Ireland and the reluctance of the Irish to accept an EU bailout except on their terms. In many of the stories, the subject of Greece often comes up, and we are reminded that that particular problem was very recent and still hasn't actually gone away. European bond markets are reacting badly to the news, which threatens to drag Portugal and Spain into the mire. The PIGS have long been identified as the EU's biggest problems, and it now seems likely that they could all be the receivers of some kind of bailout. Ireland could have a big knock on effect in the UK, as it seems that much of the debt of Irelands banks is held by UK institutions, so the debt malaise could spread.

Is Ireland heading for bailout ?

2010-11-12T03:25:00.000-08:00

The pressure seems to be increasing on the Irish economy, amid signs that the country may be heading for a Greece style bailout, much to the chagrin of the Germans, who are frankly fed up with having to help the basket cases that they are lumped in with in the EU.
The Irish economy and people benefitted more than most from entry into the Euro, as house prices went through the roof. In Spain, it seemed that for every Brit buyer, there was an Irish buyer, quite extraordinary given the relative population sizes. Of course, lots of these Irish people that had taken equity out to buy in Spain and elsewhere, are now in negative equity at home, or having problems making payments, so there will be a likely knock-on effect on their holiday homes and investments in Spain, with Spanish mortgage payments likely being secondary in importance to the Irish mortgage for their main home. Given that the Spanish economy has stalled again, it's a double whammy that one of the nations that was so enthusiatic about investing in Spain is in so much shit too.....

Spanish Recovery stalls

2010-11-11T06:57:00.000-08:00

Spain's fledging economic recovery came to a stop in the third quarter amid tough austerity measures, official data showed Thursday, hindering government efforts to slash the soaring jobless rate.
Gross domestic product showed zero growth in the three months to September 30 from the previous quarter, the National Statistics Institute (INE) said in a preliminary estimate.
It followed growth of 0.2 percent in the second quarter and 0.1 percent in the first when Spain emerged from one of its worst recessions for decades.
Spain, a member of the eurozone, has the fifth-biggest economy in the European Union.
A recession is defined as two quarters running of shrinking growth from output in the immediately previous quarter, so a month of zero growth is a cause of concern for policymakers.
The data also comes at a time of renewed concern in eurozone bond markets about high debt and low growth in weaker eurozone members Ireland and Portugal, following the Greek debt crisis earlier this year.
On occasions this year, Spanish bonds have also been affected by strains on the bond market where there is concern that austerity needed to control overspending could tip some countries back into recession, cutting tax revenues and adding to their problems in controlling budgets.
On a 12-month comparison, Spanish gross domestic product expanded by 0.2 percent after seven months running of declines by this long-term measure.
The government said the flat growth would impede its battle to slash the unemployment rate of more than 20 percent, the highest in the 16-nation euro zone.
"It is not possible to create employment" with zero growth, Employment Minister Valeriano Gomez said.
"Spain still needs to grow by 2.0 percent to create employment," he told Cadena Ser radio.
He forecast that employment would pick up in the second half of 2011, with an additional 40,000 and 50,000 jobs created in the year.
The INE said the latest figure reflects lower national consumption compared with previous quarters.
The figures confirmed estimates by the Bank of Spain last week, which forecast "a weakening of economic activity, of a transitory nature, due in large part to the depletion of some expansive factors."
"These include the impact on national demand of the budget austerity measures adopted in May," it added.
The government has suspended dozens of road and rail projects and cut civil servants' wages as part of deep spending cuts aimed at reining in the massive public deficit.
It has forecast the Spanish economy will shrink by 0.3 percent this year, following a fall of 3.7 percent in 2009.
In May it lowered its growth forecast for next year to 1.3 percent from 1.8 percent due to the impact of the tough new austerity measures.
The government aims to bring the public deficit down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013. The deficit hit 11.1 percent of GDP last year, the third highest in the eurozone after Greece and Ireland.
The measures were introduced at a time of rising fears that Spain and other southern members of the eurozone could follow Greece into a financial crisis.
The Spanish economy slumped into recession in 2008 as the bubble burst on a decade-long property boom and amid the global financial meltdown.
The INE is to release definitive figures for the third quarter on November 17.

An interesting house to rent

2010-11-10T05:27:00.000-08:00

We just went house hunting at the weekend, looking for somewhere to rent. Our landlord in the UK has told us that he intends to try and sell our current abode when our contract expires, in August 2011. Yes that's right, August next year. In true style then, my GLW (good lady wife) has already started looking....
And what happens when you look for a house? - lo and behold, you find somewhere that you really like!
Anyway, the interesting thing about this house, is that it was owned by a builder that went bust, and is in major hock with the bank. So the bank have come in and finished the project, and are left with a property that "owes" them more money than they could comfortably recover with a sale.
So, rather than liquidate the loss, the bank (we don't know which one) has decided to become a landlord for a few years - I guess they can at least get some income and hold an "asset". So, we may have a bank as a landlord for a couple of years, as long as they drop the asking price enough that we can afford it - nice place though.........

More BTL mortgages available again in UK

2010-11-04T07:23:00.000-07:00

A recent financial adviser confidence tracker report suggests that availability of buy to let mortgages in UK has improved.
As many as 43% of surveyed mortgage brokers said that the number of available deals increased in Q3 2010. Another 38% said they have not noticed any changes in the number of mortgage deals for property investors, and only 19% of respondents said the number of available loans fell.
The survey also found that 58% of mortgage brokers expect the situation on the market not to change significantly in Q4, whereas 35% hope it will get even better. The remaining 7% think the availability of buy to let mortgages will decline.
The report comments that the market has significantly improved in the past months, however, it still is not back at its pre-crisis level. Many professional buy to let landlords still find it hard to access loans.

Unemployment in Spain rises again

2010-11-03T02:18:00.000-07:00

Unemployment in Spain, which has Europe’s highest jobless rate, rose for the third month in October as the economy struggles to recover from an almost two-year recession.
The number of people registering for unemployment benefits rose by 68,213, or 1.7 percent, from September to 4.09 million, the Labor Ministry in Madrid said in an e-mailed statement today.
Given that the construction industry in Spain looks to be well and truly screwed, at least for a few years, it's quite difficult to see where they are going to create many new jobs from. There aren't that many industries in Spain that have a true international appeal or weight, aside from a small number of high profile ones - Seat, Ferovial, perhaps.
And with this level of unemployment comes a double whammy on the eceonomy - higher benefit payments for all those people, and less spending in the economy, with loans and mortgages under increasing pressure.
Spain’s unemployment rate, double the European average, fell in the third quarter to 19.8 percent, even as Prime Minister Jose Luis Rodriguez Zapatero said the number should be viewed with “prudence.” The economic recovery probably slowed from July to September, Bank of Spain Governor Miguel Angel Fernandez Ordonez said on Oct. 5, as the government tries to slash the euro region’s third-largest budget deficit with the deepest austerity measures in at least three decades.

Back in austerity Britain.....

2010-11-02T09:35:00.000-07:00

....I seem to have acquired another job to go with the, admittedly quiet, overseas mortgage broking, and the current day job in the music business. I am getting involved in an online gambling business to help out the owner, who is an old mate. So in a time of rising unemployment I could be working 3 jobs "to make the rent", as they say in the US. When things start looking up and the mortgage business starts flowing again I could be a very busy boy. Bring it on I say.

Sunny Spain

2010-11-02T09:12:00.000-07:00

Just back from an enjoyable week in Southern Spain, where the fine autumn weather with temperature in the mid 20's felt a world apart from miserable grey Britain.

There still seems to be an awful lot of half finished apartments blocks, and the buzz that existed 3-4 years ago has well and truly gone. The building sites look even worse now the scaffolding and machinery has gone, and I can't see that they are coming back any time soon.

Part of the problem affecting sentiment in Spain still seems to be a complete mistrust of the banks and any official figures. The government says prices are going up, and the largest valuation company says they are going down. And the banks seem to be under suspicion of completely underdeclaring the true value of the repossessed properties on their books. We have friends with an apartment in Calahonda and the bank have completely stopped communicating with them, not chasing for money, not sending warning letters, or threats of repossession. They fully expect to lose the apartment, but in the meantime they are mortgage/rent free - they hav e no incentive to pay when the mortgage is higher than the purchase price would be for the apartment next door, it's an incredibly tricky situation.

Bank debt worse since 1995

2010-07-19T06:51:00.000-07:00

Bad debt in Spain has reached its highest level since June 1995 with the number for May climbing to 5.707%. It means that the amount of doubtful credit increased by 476 million € in just a month.

Once again it is the Caja savings banks which carry most of the bad debt, according to the data published today by the Bank of Spain. They have had a bad debt level over 5% for the past 14 months.The total volume of doubtful credit at banks, savings banks and cooperatives is now 95.291 billion €.

The Bank of Spain considers credit as doubtful when an individual or a company goes three consecutive months without payment.According to the Spanish Chambers of Commerce, 85% of Pyme small businesses are ‘sweating’ to find finance. They say that the number of companies applying for grants is up, and many are finding it had to get paid by pubic bodies. As many as 85.4% said they had come across the problem in the second quarter of the year.

Air traffic controllers have denied that the high numbers of workers from Barcelona off sick on Sunday, and to a lesser extent again today, is an undercover strike. Delays have been seen as a result, most on flights to Barcelona, Alicante and the Baleares. An investigation has been ordered by the Minister for Development, José Blanco, but the controllers are adamant that all the sick leave is accredited and any delays are ‘normal and less than in other countries’

Telefónica has taken the first step to break its alliance with Portuguese Telecom. A firm of lawyers has been taken on to try to dissolve the alliance the Spanish company has with its Portuguese counterpart in the Brazilian company Vivo.Counterfeit Euros are still being produced, but on a lower scale than before. During the first six months of this year there was a 13% fall in the number of fake notes impounded by the authorities. Even so, over the first six months of the year a total 370,000 fake notes were taken out of circulation, according to the European Central Bank.Gas Natural Fenosa has won the tender to improve the energy efficiency in the Ministry of Industry building in Madrid. Savings of at least 10% are now expected in the ‘Cuzco complex’ building which is also home to some of the offices for the Ministry for the Economy and Hacienda.The President of the CEOE employers’ organization, Gerardo Díaz Ferrán, faces court after five employees of the Air Comet company are demanding their pay dating from October and November last year, when he was still the owner of the airline. The first case reaches court in Madrid on Wednesday next week.And finally,Filling your car tank with petrol or diesel will cost you about 10 € more than a year ago. Over the past 12 months diesel has risen in price by 19% and petrol by 13%.Read more:

Exchange rates report

2010-07-14T08:32:00.000-07:00

Please find below the latest currency exchange report from our friends at Foremost Currency Group.

EUR

Over the past week we have seen a steady decline for the Sterling-Euro currency pairing. With the bearish sentiment expressed towards the pound, Euro prices fell 1.6% over the week to a low of 1.1928 from previous highs just pushing over 1.21. Sterling began to slip on Monday after a weaker than expected reading of the UK services sector highlighted the fragility of the country’s economic recovery and thus prompted investors to take their profits from the pound’s rally over the last few weeks. With an increase in the supply of sterling on the currency market, prices naturally began to fall.

With few news releases holding much impact for the currency pairing this week until Thursday, the ongoing situation for BP as well as the aforementioned profit booking eroded the previously seen sterling strength, although at a pace subdued by weak GDP growth figures in Europe.

Financial talk within the UK recently has focused on the possibility of a ‘double-dip’ recession and the impact it would have. Whilst the risk of Britain sinking back into a period of declining economic growth has grown in recent months, a 12-strong team of respected economists and business leaders on the Sky News Money Panel unanimously made the call that the the UK would avoid a double dip. They confidently and correctly asserted the Bank of England would make no monetary policy changes following the July interest rate meeting. The same was true of the ECB who held European interest rates at 1%.

Economists said that the BoE was walking a tightrope between nervousness over rising inflation and growing concern about the impact of last month’s austerity budget on the struggling economy.
“The stickiness of UK inflation remains a concern but ‘lower for longer’ is likely to remain the theme when it comes to interest rates,” said Stephen Boyle, head of economics at Royal Bank of Scotland. Inflation is expected to climb even higher after the government ramped up VAT to 20% from 17.5%, set for introduction in January 2011.

It was because of this inflationary pressure that we saw dissent from policymaker Andrew Sentance at June’s MPC meeting. Expect to see more rumour and unrest within the MPC over the course of the year as pressure on inflation continues.

Sterling has rallied in the past month in the wake of a general election in May and the new coalition government’s budget announcement, this rally has however now started to wain due the possible impact of tax rises and spending cuts on the overall economy.

The trends displayed this past week demonstrate the worth of staying up to date in order to maximise your currency purchase potential. By contacting your account executive here at the Foremost Currency Group for a free consultation, we can help you to optimise that purchase. For example, buying €200,000 this past week on Friday instead of Monday, would have meant a loss of over £2400. We can help you to avoid losses by giving you relevant economic information and opinion on trends within the currency market.

For the week starting 12th July, we see a whole host of data releases in the UK; GDP figures on Monday and the claimant count on Wednesday holding the most potential for placing pressure on sterling. Whilst in Europe, the German economic sentiment survey on Tuesday and inflation figures on Wednesday hold the most gravity.

For more information on how upcoming data releases may affect your currency, see the below for a concise round-up of volatile market moves or call in for consultation with your Account Manager here at the Foremost Currency Group. We keep abreast of key announcements from prominent government figures both here and in Europe, helping us to help you maximise your Sterling/Euro currency potential.

USD
Last week saw another volatile week for the GBP/USD pairing, with a high on Thursday of 1.5225 and the low of 1.5090 that was hit on Monday, Wednesday and Friday respectively. Sterling edged up versus a broadly weaker dollar on Friday as the day progressed as signs of an improving global economic outlook supported higher-risk currencies.
Sterling hovered near a two-month high hit against the dollar on Thursday. It slipped to its lowest against the euro in 2-1/2 weeks as the single currency also benefited after Thursday's upbeat U.S. jobless claims data.
"Sterling has been benefiting from weakness in the dollar," said Adam Cole, global head of currency strategy at RBC, adding that investors' greater appetite for risk was putting selling pressure on the U.S. currency. A climb above 1.5224 hit on Thursday would mark the pound's strongest since early May.
In other Dollar related news, the U.S. pledged to monitor China’s “undervalued” yuan in the next three months for signs that Asia’s fastest-growing market is living up to its commitments to help rebalance the global economy.
China took a “significant step” last month when it ended its peg to the dollar and allowed markets to drive the currency higher. A report by the US Treasury department, initially due April 15, concluded that no major U.S. trading partner manipulated its currency and said it’s not yet clear whether China’s policy shift will correct the yuan’s undervaluation. The Treasury promised another review in October. You may think these developments may not directly effect the GBP/USD pairing, but are worth keeping tabs on as if we see a weakening dollar in any area, it is surely good news for those looking to purchase with Sterling.
This week, we don’t have a great deal of significant data releases of note from the USA, other than the release of the Fed Budget for June on Tuesday, which may effect the markets depending on its content, anticipation of which way this will swing is somewhat limited at present but it is broadly considered unlikely that we will see any major change. We will however be looking to see if the pound can sustain it's recent gains against the dollar, or whether we will see profit taking by investors, where they reverse their positions to tie up any gains they have made in the rise of the currency. We saw this happen in previous weeks for the GBP/EUR cross, and as a result, the pound lost nearly 2% in value against the single currency.
Looking at the broader picture, we are still sitting at almost a 6-month high against the Dollar, therefore locking in at these levels and capitalising on your own currency gains is certainly worth consideration if you have any upcoming requirements in the short to medium term future. By paying a deposit of up to 10%, you can fix your exchange rate at the current level for anything up to 2 years, giving you peace of mind about the fluctuating exchange rate.

FSA to ban fast-track and self-certified mortgages

2010-07-14T05:38:00.000-07:00

Mortgage borrowers will find it takes longer to process their application and the self-employed could struggle to get a loan if proposals announced today by the Financial Services Authority are implemented.
The regulator has published a consultation paper which proposes requiring verification of borrower's income in every case to prevent over-inflation of income and mortgage fraud.
If implemented, this will prevent the "fast tracking" of mortgage applications – the granting of loans without requiring proof of income – a wide-spread practice among mortgage lenders.
David Hollingworth of mortgage broker London & Country says it could mean that rather than a mortgage being granted instantly – as often happens now providing the lender can find enough information about the borrower's credit history electronically – it could take up to three weeks for the borrower to find out if he or she qualifies for a desired loan.
The proposed move also means that those who have recently become self-employed have no hope of applying for a "self-certified mortgage".
These loans were initially designed to enable self-employed borrowers who had less that three years' of accounts to borrow loans without providing bank statements or tax returns to support their claimed level of earnings.
But over the past few years, as people have begun to struggle with the amounts of borrowing they have taken on, it has become apparent that the loans have been used by many borrowers who wanted to take out bigger loans than a lender would normally allow them.
The FSA has also acted against several mortgage brokers who have fraudulently increased the amount of money applied for in mortgage applications.
The consultation proposes imposing affordability tests for all mortgages, making lenders ultimately responsible for assessing a consumer's ability to pay, and preventing the use of interest-only loans to enable borrowers to cope with a mortgage they could not otherwise afford.
Although the self-certification mortgage has disappeared from the market during the credit crunch, the proposals will prevent lenders from reintroducing itonce confidence returns.
Hollingworth says the proposals are sensible: "The proposals are quite measured, but they will set a framework so when the market goes into recovery, we have something that contains the lenders a little bit. The lay man will hopefully regard this as common sense."
However the Building Societies Association said there was a risk the proposals could create "mortgage prisoners". Paul Broadhead, head of mortgage policy at the BSA, said: "To ensure borrowers are not adversely affected, it will be important that when the rules are implemented they provide clarity for lenders and are enforced consistently across the market.
"Interest-only mortgages are not inherently bad or high risk. However, it is important that borrowers with interest-only mortgages understand the importance of having a plan in place to repay their mortgage at the end of its term. The FSA needs to proceed with caution so as not to restrict the use of interest-only as a way of helping borrowers overcome repayment difficulties."
The proposals were drawn up following detailed analysis of past lending decisions, looking at the causes of arrears and repossession since 2005.
The FSA found that:
• 46% of households either had no money left, or had a shortfall after mortgage payments and living costs were deducted from their income;
• Almost half of new mortgages between 2007 and the first quarter of 2010 were provided without a customer having to verify their income;
• The share of interest-only mortgages has been increasing. At the peak of the market, over 30% of all mortgages were interest-only;
• Many consumers with no repayment vehicle count on future house price rises or uncertain life events to repay their mortgage and some have no plan at all;
• Borrowers with a credit-impaired history are particularly vulnerable.
Lesley Titcomb, FSA director responsible for the mortgage market, said: "There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back.
"While it is clear the mortgage market has worked well for many, we need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers."
The FSA also wants to provide extra protection for vulnerable customers with a credit-impaired history.
Today's report includes the key findings from the FSA's review into arrears charges, which indicated significant variation in the level of arrears fees across the market.
The mortgage rules require arrears charges to be based on a reasonable estimate of the cost of the additional administration caused by the customer's arrears.
The FSA has stepped back from an idea initially raised in the mortgage market review discussion paper last year to set a maximum loan-to-value ratio on mortgages. Such a move would have signed the death knell for mortgages worth 100% of the property's price.

Spanish House Price Data - "Bonkers"

2010-07-14T05:32:00.000-07:00

This article comes from our friends at Global Edge

Spanish overseas property portal, Kyero.com has published a new report which aims to provide a more accurate picture of the Spanish property market.The new report analyses the three most important sources of information, official data, data from valuation companies and property portal statistics.

Here are the highlights:

1. Property transaction figures are the most reliable and show a peak-to-trough decline of 56%. Transaction levels were lowest in the early part of 2009 and have since picked up, a little.

2. Official data from the Ministry of Housing (MVIV) publishes valuation data but not information about actual sale prices, even though it has the information. Publishing actual data would improve transparency in the market and lead to more property transactions says Kyero.com’s Martin Dell. It should stop pursuing a political agenda and behave more responsibly.

3. Official data shows a price drop of 11.2% over two years which is clearly ludicrousPortal data from likes of Idealista, Fotocasa, Facilisimo and Kyero record asking prices but as asking prices can differ significantly to the actual prices paid, they are not accurate and can appear to be “bonkers” says Dell. The most realistic figures are from Idealista.com, which show a peak-to-trough decline of 23.7%4. Valuation company data shows average declines of around 15%. This is not accurate either. It is worth noting that valuation companies are employed by banks, so have a vested interest in reporting higher prices.

It is difficult not to agree with Dell’s conclusion:“What the market needs is for the Spanish government to publish actual transaction prices of individual properties so that the 'hard facts' are available for further analysis. While this will not reveal the 'actual' price paid for the property in most cases - thanks to a cash element of many property transactions - it will level the playing field"."My own belief is that when property buyers are armed with better data, they make better buying decisions. When that data is lacking or incomplete, they either make sub-optimal decisions or they decide not to buy at all. This lack of data transparency, in my opinion, is a significant factor in the continued suppression of the Spanish property market”.

Eurozone Production Output grows for 3 months in a row

2010-07-14T03:28:00.000-07:00

Industrial production in the 16 countries that use the euro increased for the third consecutive month in May.
Eurostat, the EU's statistics office, said production climbed by 0.9% from the previous month, the same as the increase seen in April.
However, economists had forecast a rise of 1.2%.
Eurozone manufacturers have benefited from the lower value of the euro, as this makes their goods cheaper in countries outside the bloc.
This has helped manufacturers play a key role in dragging the EU out of recession.

UK Unemployment falls

2010-07-14T03:21:00.000-07:00

The number of people unemployed in the UK fell by 34,000 to 2.47m in the three months to May, official figures show.
Meanwhile, those claiming Jobseeker's Allowance fell in June by 20,800 to 1.46m, the Office for National Statistics (ONS) said.
That took the jobless rate to 7.8%, the lowest since January and below forecasts of about 7.9%.
The number of people in work rose by 160,000 in the three months to May, the biggest rise since August 2006.
However, the increase was due to a record 148,000 rise in the number of part-time workers, while full-time workers increased by just 12,000.
The ONS said the percentage of workers in part-time jobs was 27%, its highest since records began in 1992.
The figures will raise hopes that the economic recovery is gaining momentum. Although some experts think unemployment could start rising again by the end of next year. 'Stable' market
Andrew Sentance, a member of the Bank of England's Monetary Policy Committee, said in a speech on Tuesday that the labour market had stabilised.
"Evidence from the Bank of England's agents and recent employment surveys is that the labour market in the UK has stabilised and that labour demand in the private sector may have already started to pick up."
David Tinsley, an economist at National Australia Bank in London and a former Bank of England official, agreed that rising unemployment had come to an end - for now.
"It may pick up again next year. It's hard to see how a steady pace of improvement will be maintained as public-sector job losses start to bite."
Vicky Redwood, of Capital Economics, was also cautious about future downward trends. "We still doubt that private sector hiring will pick up strongly enough to offset the severe public sector job cuts," she said.
The UK jobless rate compares with 10% in the eurozone, 9.5% in the US and 5.2% in Japan, the ONS report showed.Pay rises slow
Meanwhile, the ONS reported that wage growth eased sharply in the three months to May, with average weekly earnings growth falling to 2.7% from 4.1% in the three months to April.
Stephanie Flanders, the BBC's economics editor, said: "The bottom line is that UK households are still seeing a significant squeeze in living standards as a result of the financial crisis, even if more people than expected have found paying work.
"And, lest we forget, the squeeze from higher taxes and lower public spending has barely begun," she said.

US mortgage madness - is it happening again ?

2010-07-08T07:20:00.000-07:00

Last night I caught up with 3 of my old mates from University, one of who has been living in Denver for the past year.

We touched on the credit crunch and generally set the World to rights, and he told a story that should cause reverberations around a World that is struggling to recover as it is......

He has some friends in Denver, and the husband is concerned about his job at the moment, and the potential effect that being out of work could have on their ability to pay their mortgage etc.

Their house has a bit of equity, so they have decided to put it on the market, and either downsize, or rent, which would allow them a bit of cash to use as a buffer.

So, they went to their bank to let them know what they were planning to do

"Why do you want to do that ?" Says the bank

"Because we may have problems paying the loan", say the couple

So the bank says (and I paraphrase) -

"Why don't you stay in the house, we will refinance onto a better rate, and go up to 125% ..."

Taken aback, our couple say "But we don't need more money, and we will still have problems paying"

"No problem" say the bank. "we will extend your term to 30 years hence reducing the monthly payments"

Shocking eh?

This is exactly the type of irresponsible lending that got us in the huge pile of shit that we are still trying to get out of. Be afraid, it could be happening again.............

ECB leave interest rates unchanged again

2010-07-08T06:59:00.000-07:00

The European Central Bank left its benchmark interest rate unchanged at a record low of 1 percent for the 14th consecutive month on Thursday amid lingering concerns over the health of the continent's banking sector.
The ECB's governing council had been widely expected to leave its refinancing rate where it has been since May 2009. Economic growth in the 16-nation eurozone remains modest and inflation tame - fueling expectations the central bank will stay put for months to come.
After economic activity strengthened during the spring, eurozone gross domestic product is expected to keep growing at "a moderate and still uneven pace" ECB President Jean-Claude Trichet said in his opening statement to a post-decision news conference. Inflation rates should remain moderate next year, he added.
With rates on hold, Trichet was facing questions on banks' demand for cash and the upcoming publication of "stress tests" on European banks.
Market fears focus on concerns that banks are holding government bonds and other debt from financially troubled countries such as Greece, Portugal and Spain - and could be dragged into Europe's simmering government debt crisis.
To dispel such fears, European Union leaders have pledged to disclose the results of the "stress tests" designed to show how banks would do if circumstances worsen. Trichet welcomed that decision.
Results are to be published July 23. French Finance Minister Christine Lagarde has said they will show European banks are "solid and healthy."
The tests will cover 91 banks in Europe, which represent 65 percent of the European banking sector.
On Wednesday, the committee subjecting the banks to stress tests said it has widened the factors aimed at determining their financial health. That reinforced confidence in the results.
Last week brought signs of relief on another front as a record batch of unusual 12-month loans to banks expired smoothly. As the euro442 billion ($557 billion) in credit came due, the ECB said it would lend a lower-than-expected euro131.9 billion to banks for the next three months.
That suggested banks' cash needs are easing despite lingering worries about the impact of the eurozone debt crisis.
The outcome has helped lift the euro after a prolonged battering. The currency, which hit a four-year low below $1.19 on June 7, traded above $1.26 on Thursday.
Separately, the Bank of England left its base interest rate at a record low of 0.5 percent for the 17th straight month and left its asset purchasing program on hold. Britain's economic recovery remains fragile and public spending cuts are expected to hamper future growth.