During the credit boom it was difficult to get behind with debts. At least it was difficult to get behind if you owned your home. All you had to do was use the rising value of the equity in your home to pay off credit card bills.
But as the credit crunch bites, and house prices fall in value, this option is being removed. And so all eyes turn to the data on insolvency, the level of loans in default, and loans in arrears.
Yesterday, the FSA revealed its own take on the situation with data on lending, arrears, and possessions.
The good news, there was no rise in the number of new cases of loans in arrears. But the total number of loans in arrears grew by 15% in the year to 2008 Q1. “This indicates,” says the FSA, “that borrowers in arrears are staying in arrears for longer periods of time than previously.”
Numbers of new possessions grew significantly in late 2007 and early 2008, with 9,152 new cases in Q1, a rise of over 40 per cent on a year earlier.
The FSA also turned its attention to the size of mortgages relative to the value of homes they are secured against. It said: “Significantly fewer new loans have a LTV (loan to value) of more than 90 per cent, reducing from a peak of 15 per cent of new lending to 10 per cent in 2008 Q1. The use of combinations of high LTVs and high income multiples has also declined to under 7 per cent of new lending.”
As for subprime-type lending. The FSA said: “Loans to borrowers with an impaired credit history represented 2.3 per cent of new lending in 2008 Q1, compared to 3.6 per cent a year earlier.”
The big drawback with these figures is that they relate to the first quarter of this year. On the face of it they look bad, but not all that bad. The snag is we know things have got worse since then, so we have a long wait before we get the FSA’s take on the quarter just gone.
Comments
Trackbacks