Mark Wadsworth

This is a spare 'blog in case my main 'blog at isn't working

Lloyds ‘not particularly exposed’ to further hosue price falls

Shock horrors from CityWire:

State-backed lender Lloyds (LLOY.L) will be the ‘most exposed’ of UK banks if house prices in Britain fall a further 10%, as Morgan Stanley expects them to, the investment bank said in a report today…

Noting that 54% of Lloyds’ loan book is in UK mortgages (£341 billion at 10 December), Morgan Stanley’s analysts forecasted that 27% (£90 billion) of these loans would be in negative equity by December next year.

Ho hum.

Just because a loan is in nequity does not mean much in itself, let’s assume that a quarter of all Lloyds’ mortgages are a hundred per cent loan-to-value as at today’s date and house prices fall a further ten per cent. The bits of those loans which are then no longer secured on land and buildings is only ten per cent of face valeu of those loans, i.e. out of a loan book of £341 billion, £9 billion (two-and-a-half per cent by value) can be shuffled from ‘secured’ to ‘unsecured’, and a commensurately higher rate of interest charged (let’s say over 10% per annum).


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