First mortgage lending fall since 1990

irishtimes.com/newspaper/bre … king28.htm

The start of a long slow process, IMO.

Maybe its a simplification but theres a number in that article that jumps out at me …

The NAMA solution is generally accepted to be circa 90 billion

So a cadre of say 50 powerful people (developers, politicians,bank execs, regulators) managed to generate a 90 billion hole whilst the other 4.5 million were getting by on 148billion

Excellent news, we are finally reducing the amount of money owed.

De-leverage in action.

If anyone out there has questions about wheather they are in negative equity or not, theres your answer.

Disagree.
Some of the most moronic lending that I saw was to people like my neighbour who ran a cafe and decided he would become a developer overnight and promptly lost a few million… he was far from being one of your “50” - rather a normal joe soap in fact. There was loads of that, the professions particularly, getting involved in leveraged schemes that have now collapsed around their ears. It’s wrong to blame justthe “50”, society had a much larger part to play than that.

Was this not predicated on the pin way back, and was there not some “we’ll really know the shit has hit the fan” stuff around this very event?

summoned back from the dead

Indeed, indeed, around last August/September as I recall, slightly ahead of schedule though as I thought it wouldn’t happen till May/June. Still, only a few weeks out, not bad for something most deemed “impossible”.

This is the critical inflexion point I’ve been warning about all along. This is where things get interesting - though as always with economics there’s a time lag effect before this feeds through to the real world. Let’s see, debt deflation event in April so that would put the systemic crisis at around…September? October. Yeah, mid October, by my reckoning.

fades back into the netherworld

Wasn’t that figure EUR30Bn in 2001? Or was it EUR40Bn?

"systemic crisis " What is one of those? :confused:

I would’ve thought that debt reduction was good for all (except bankers :smiling_imp: ).

Exactly!

It is good for the people and the country, the sooner we get the debt down to manageable levels the sooner the country will start moving again and the sooner the reccession will end. It shows The People, bless 'em, aren’t entirely daft and are taking the appropriate corrective action themselves.

It’s pure poison for the banks though. Well, for the existing highly-leveraged debt-pushing insolvent banks. This is why the Guarantee was such a bad idea. The existing banks are going down, and fairly soon as the debt deflation starts to bite them, but the Guarantee essentially tied the fate of the banks to the fate of the State.

Thanks, that’s what I thought - just double checking.

How do you see this playing out, Sidewinder? What are the stages that you see over the next few months, and what sort of Government counter measures can we expect? And what sort of banking system will we have by December?

The important figure is debt relative to income. The amount of outstanding debt can increase forever if income is growing faster than it. On the other hand a reduction in debt only improves the situation if it’s decreasing faster than the economy is. Given the shitty “fundamentals” of Ireland inc we’re probably worse off than we were a year ago.

I would think this drop is a massive worry from the central banker’s point of view since it’s another sign of a deflationary spiral.

TBH, I think it is also good news for the banks. The Irish banks have a couple of serious problems:

  1. They are dependent on the short-term interbank market (they have lent long and borrowed short). There are therefore subject to shocks. How damaging these shocks are depends on how ‘safe’ they are considered.
  2. They have poor asset quality. Low LTV to begin with (nobody really believed the LTV’s being spouted - everyone knew that there were two types of mortgages, pre and post bubble), over-priced, so likely to remain low or negative LTV, too many amateur investors, liar loans, subprime, IO, you name it. Any reason you can think of why a mortgage might be poor quality, it is likely to be on the Irish banks’ books. If not here, then overseas.

So repayment over new lending is actually good news for the banks. If their asset quality improves, their funding costs will go down. Which will improve their margin. Which will make them more able to take losses without eating into their capital. Which will allow them to trade their way out.

That’s a lot of whichs. If you put an “if employment stabilises soon” and “if tax rises stabilise soon” and lots of other ifs in front of those statements, you might have a picture of it…

Good points YM, the lack of prudence and total stupidity and greed leaves me speechless. Question is there any bank/building society in Ireland or the UK that anyone knows of that acted with any prudence whatsoever over the last decade (and Im not talking about Rabo and the like) more the high street type?

Nationwide in the UK stayed reasonably sensible. They offerred low rates, but kept their qualifying conditions high, so far as I can see.

At the very least, there haven’t been whispers, never mind roars about them.

We got our mortgage from NIB and found them pretty rigorous for checking salaries etc. The salary multiple they were willing to advance was also lower than other banks.

A quick back of an envelope calculation on the PSC figures here:

Since September 2006 (when it is widely accepted the property slump and international credit crunch started) and April 2009, lending increased by €92 million, of which €32 million was morgages and €60 billlion was other loans…

This represents €23,000 per man woman and child in the State over that period, or approx €10,000 a year

Add to the €92 million above borrowed, the €20 billion the government will borrow this year and, I know lots of people are saying this already, but are we not taking the country to the brink of bankruptcy? Are all working peoples wages effectively being paid by borrowing from foreigners? these PSC numbers would need to start reducing significantly soon? Note also that the credit card outstanding debt of €2.8 million has hardly budged downwards, implying that people are financing their lifestyles/mortgages with debt at extortionate interest rates, because they cannot get other credit lines

Been saying the same thing for years.

The PSC rate of increase grew steadily since 2002, was €63bn y.o.y. at the peak in 2006, and stayed close to that for another two years - of course the economy looked good with 1/3 of GDP directly financed by borrowing, and no doubt various multiplier effects boosting that further.

Nearly all growth in the irish economy since 2002 has been nothing more than the result of borrowing - borrowing which must effectively stop for a long long time.