More dismal news for UK homeowners. House prices fell 0.8 per cent in November, according to Nationwide - reining in the annual rate of growth to 6.9 per cent.
That drop is the first since February 2006 - and is the largest decline logged since the summer of 1995.
The figures reverse the unexpectedly strong performance in October - when prices rose 1.1 per cent - but which was widely seen as an aberration in what is a markedly weakening trend for house price data. That’s born out in the three-monthly growth numbers that in the latest period fell back to 1.5 per cent, from 1.8 per cent the month before.
The figures come on the back of dark predictions made through the medium of new derivatives contracts, through which the City is betting on house prices falling 7 per cent next year. The deterioration in outlook reflected in derivs trading, which showed expectations shifting from a 2 per cent fall to a 7 per cent decline in the space of one month, demonstrates how quickly sentiment can shift.
And yet….
Bradford and Bingley on Thursday in a pre-close briefing said its profit for the full year was expected to be in line with consensus and added:
We have continued to write good levels of new buy-to-let business and the new business pipeline at the end of October, whilst lower than June, was higher than a year ago.
The bank went further with a confident outlook for its specialist buy-to-let lending, citing “strong fundamentals”.
Que? Lex noted last week that net rental yields are now below financing costs and likely to stay there.
But B&B - rather like fellow specialist Paragon, despite its financing troubles - painted a picture where landlords are still active buyers. Rental levels are still rising, added B&B, while the pros may benefit as housing uncertainty prompts others to rethink their purchase plans. And for B&B, as wholesale-funded lenders go pop or just draw back from BTL, there is a chance to pick up market share.
On the funding side, B&B, always rather a prudent player among the UK banks, reported it had seen some panic-related deposit outflows during the half but that this had now reversed, and decided it might be helpful to summarise their exposure to what the market currently regards as toxic waste: SIVs and CDOs. Funding concerns surrounding B&B eased last week when the bank sold £4.2bn of unpackaged mortgage loans to Dexia and GE Real Estate. The fact though that it chose to take this step, at a loss, seemed to reflect rather the dearth of other funding options for the UK mortgage banks.
The summary is of four SIVs totalling £125m and CDOs of ABS totalling £140m. No permanent impairment as yet - though the downgrade of £20m investment by one of the bank’s CDOs may change that and is under review. B&B has logged on its balance sheet a mark-to-market change for all its debt securities of £82m in the four months between July and October, reflecting the declining value of their debt securities investments. That though does not yet affect profits or regulatory capital - because the instruments are classified as ‘available for sale’ rather than as trading securities.
B&B shares rose 4.71 per cent on the back of the bank’s reassuring noises. But B&B was meant to be broadly OK. Peer Alliance & Leicester in contrast leapt 13 per cent on relief that the bank isn’t - as everyone suspected might be case - Crocked.
