Robert Preston's blog: HBOS, UBS and Sants

[Steve Gardner]

I've got to say, the BBC's Robert Preston writes one of the most informative and entertaining blogs out there. His piece on Wednesday, entitled HBOS, UBS and Sants, is a good example of the sort of genuinely thought-provoking material he offers up. It'd be great to have him here as a contributor to our humble little forum.

After describing an ugly-looking and apparently very costly deal UBS did recently, which - if I'm reading Preston correctly - involves UBS lending the buyer a significant chunk of the purchase price, he asks:

...does it mean that we're still at the end of the beginning [of the credit crunch], in that it's impossible to do an arms length deal even at a knockdown price?

He then goes on to describe another staggeringly demoralising deal, this time involving HBOS.

The same question is posed by yesterday's deal that reopens the British mortgage-backed securities market, HBOS' piddling sale of £500m of securities backed by prime UK mortgages.

It's the first sale of mortgage-backed bonds by a British bank since last August.

But the amount is a fraction of what HBOS would typically have sold before the market shut down. And HBOS is paying an extraordinary amount for the money - 0.85 percentage points above LIBOR, even though the £500m is backed by mortgages worth about £800m.

It shows you how much international investors fear the prospects for the British housing market if they are only prepared to lend money to HBOS at more than 6.5%, even when the collateral is worth between 30 and 40 per cent more than the loan.

And, as he rightly points out...

That is scary.

Particularly if, like me, you're in the process of buying a house.