The prime minister was heard telling aides on Friday night that there was “no sub-prime” in this country.
This stretches the “narrative” (all of our problems have come from the US) to breaking point.
While it is true that financial markets have been brought to their knees by a crisis which originated in the US – where subprime lending was close to 20 per cent of the total – that does not mean that we are immune. As this blog has pointed out before, we won’t know the full impact of foolish lending practices within the UK until our housing market has fallen further; as our property cycle is at least one year behind that of the US.
In fact sub-prime lending in the UK is (according to banking organisations) 5-8 per cent of the total; even excluding “self-cert” (or ‘liar loans’) and buy-to-let mortgages.
Of the pure sub-prime mortgages, one in four borrowers had missed a payment by mid-2008; a far from reassuring figure.
So what is the PM talking about? Is he using the thin argument that UK subprime does not exist because it tends to go under a different name: “non-conforming” loans? Vince Cable tells me the prime minister is “out of touch”: “It is still a problem here. Even if it has a different name it still exists”.