UK property polemics

The UK media seemed to be out for another party again very recently. They were revelling yet again at the prospect of an impending UK property market crash - or at least a serious slowdown; e.g. Times article. Even the BBC joined in BBC article. Now of course I think they did some serious analysis and lots of research before they came up with this important forecast, didn't they? And so what appeared to be the basis of their wise predictions? UK new mortgage issuances were down... This could be important of course, notwithstanding some journalists' unhealthy habit of basing some drastic outlook on the large sample of one single data point. But did anyone when relaying this result to their readership stop once to consider the very relevant recent happenings in the global credit markets and it's possible secondary ripples? Do the writers in question realise mortages means lending money, credit means lending money and hence mortgages and credit may be related? I wonder.

2 big things that may be at play, but which, as far as I know, were conspicuously absent from the articles concerned. The US sub-prime mortage crisis was fundamentally caused by selling too much bad debt - offering mortgages to those that could never really afford them. The trick being to sell loads of these but then package them up and manage (unbelievably) to conceal the default risk associated with these loans (i.e. how dodgy they were) and sell the loans on to some one else. That'll do very nicely thank you sir. So, effect one: lots of naughty lenders are being inspected or feeling that they are about to be hauled over the coals. It's highly likely therefore that mortage lenders worldwide will be feeling at least a little less liberal at lending than they normally are. Hey, they might even read some applications and checking some credentials. And maybe, just maybe, this might be putting the brakes on new mortage figures. The other ignored effect was nicely highlighted in the FT yesterday. Northern Rock - another possible credit crunch effect I wonder - is in so much trouble that it's reducing its lending activity significantly. And no way this is the only lender that this is happening to. So many players caught up in this market scam (a much better label than 'crisis' or 'crunch' in this case) are looking at their balance sheets in an increasingly worried fashion. And guess what? Maybe they've started to work a little harder to check who they lend to. And maybe they've become just a little bit more careful overall. And just maybe this is slowing down the mortgage issuance figures.

Now I didn't see any thinking along these lines when the UK esp. tabloid media went into the cataclysm zone recently. I also didn't see the slightest mention about whether housing demand or supply (such esoteric economic considerations!) appear to be altering significantly. Funny that.

Maybe if the reporting concerned had been a bit more comprehensive then I wouldn't have received the scores of reassuring letters and postcards off local estate agents saying there was nothing really wrong. Straight in the bin where they belong. Along with the articles in the first place.

To the journalists and editors concerned: if you don't really know what is going on, then please quieten down for all our sakes.