House price reality

An article in The Guardian covering the fright of potential bidders for Northern Rock on seeing the detail of the accounts provides some interesting details on the real potential disaster now staring Gordon Brown and his already shaky government in the face. Some figures from the article, linked here: Three years ago, the value of mortgages where the loan-to-value ratio was 90% or more was £2.7bn. It had only 158 mortgages, worth £13m, where the loan exceeded the value of the property. By September this year, the value of mortgages with a loan-to-value ratio in excess of 90% had soared to £16bn. Almost 2,500 mortgages, with a value of £263m, were in excess of the value of the property...... An analysis of the arrears history points to a sharp increase both in terms of the number and value of mortgages in arrears. At the end of 2003, about 2,500 customers were more than a month behind on mortgage payments. The capital value of the mortgages in arrears was £168.8m. By the end of September this year, more than 10,000 accounts were in arrears. The capital value of the underlying mortgages had reached almost £1.2bn. Alistair Darling, the chancellor, may believe the £23bn loan to Northern Rock is secured against high-quality assets such as mortgages. But it is unclear whether the bank has sufficient of those assets to cover the loan in full. The £53bn of securitised mortgages does not represent the full mortgage book, but it is unclear how many other companies have other claims over the rest of the book.