BGN Entrepreneur

The UK mortgage arrears are more correlated to unemployment levels than house prices. UK homeowners, unlike their US counterparts with “no recourse” home loans, tend not to send the house keys back to the bank just due to negative equity.
Recent days, with a warning of a further 15% fall in house prices, chief executive of Barclays—John Varley, has chosen to dump on the fragile UK property market.
After all, in recent months, the bank has been gaining spectacular market share in mortgage lending. In 2006 and 2007, its net share of flow in UK residential mortgages was about 5%. However, in the first half of this year, the amount has risen to 26%. Meanwhile, the average loan to value ratio of the bank on new lending in the first half year was 51%. The credit crunch has greatly transformed Barclays’ industry position.
Even if the UK property derivatives market is correct in predicting that house prices will fall 50% peak-to-trough, Barclays should emerge less bloodied than most. Only 7% of its ￡80bn mortgage book has a loan-to-value ratio above 80%.

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