Investment Week (August 4)
“The outlook for the UK equity market feels particularly depressed and it is not hard to see why. Even after June’s better-than-expected inflation figures, core UK inflation remains high, which suggests higher interest rates for longer. Commentators are expecting that the base rate, which at 5.25% is at its highest for over 15 years, is likely to peak around 5.75%. This would bring even more pain for mortgage borrowers and greater government borrowing costs to an already faltering economy.”
Tags: 5.25%, 5.75%, Base rate, Borrowers, Depressed, Equity market, Inflation, Interest rates, Mortgage, Outlook, Pain, Peak, UK
Bloomberg (April 8)
“Almost $1.5 trillion of US commercial real estate debt comes due for repayment before the end of 2025. The big question facing those borrowers is who’s going to lend to them?” Morgan Stanley has estimated “office and retail property valuations could fall as much as 40% from peak to trough, increasing the risk of defaults.” Regional banks are now skittish about lending and “the wall of debt is set to get worse before it gets better.”
Tags: $1.5 trillion, 2025, Borrowers, Commercial real estate, Debt, Defaults, Morgan Stanley, Office, Peak, Regional banks, Repayment, Risk, Skittish, Trough, U.S., Valuations
Euromoney (February Issue)
“New accounting rules requiring banks to take upfront charges against possible losses through the full life of a loan promise damaging pro-cyclicality.” IFRS 9 comes into effect next January. It “will require banks to recognize expected loan losses even before borrowers miss a single interest or principal repayment.” This major change “will hit both reported earnings and capital even if a borrower manages to remain current on debt servicing.” Uncertainty abounds, but it looks like “US and Japanese banks will be subject to their own variant, current expected credit loss (CECL), under US GAAP.”
Tags: Accounting rules, Banks, Borrowers, Capital, CECL, Earnings, GAAP, IFRS 9, Interest, Loan losses, Principal, Repayment, Upfront charges
Financial Times (June 7)
“Given today’s high level of public sector debt and worsening demographics, it is inevitable that governments will resort to soft forms of default, including inflation, to escape from their fiscal straitjacket. This is a world in which elderly savers will be condemned to subsidise borrowers for a long time.”
Tags: Borrowers, Debt, Default, Demographics, Elderly, Governments, Inevitable, Inflation, Public sector, Savers
Bloomberg (July 15)
“Cross-border private capital is so readily available for good emerging-market borrowers that multilateral lenders such as the World Bank are having to explain why they’re needed any longer. To justify their existence, they’re trying to recast themselves as repositories of development expertise.” With the BRICS poised to create their own new currency reserve fund and development bank, the proposed institutions look anachronistic. The BRICS just “don’t need their own bank.”
Tags: Borrowers, BRICS, Capital, Cross-border, Currency reserve fund, Development bank, Emerging market, Lenders, World Bank
New York Times (December 2)
While there have been some signs of a housing recovery in the U.S., action is still required. “In all, nearly 12 million borrowers collectively owe $600 billion more on their mortgages than their homes are worth, a loss of wealth and a load of debt that make a strong and steady economic recovery all but impossible.” President Obama should “use his second term to get mortgage relief right and, in the process, put the economy on a firm footing.”While there have been some signs of a housing recovery in the U.S., action is still required. “In all, nearly 12 million borrowers collectively owe $600 billion more on their mortgages than their homes are worth, a loss of wealth and a load of debt that make a strong and steady economic recovery all but impossible.” President Obama should “use his second term to get mortgage relief right and, in the process, put the economy on a firm footing.”
