20 Years work in assessing risk in mortgage books has necessitated a need to understand house price indices. Accurate assessment of loan-to-values (LTVs) depends on the best possible measurement of current house prices. It is the actual price which dictates the current collateral upon which a loan is secured and whether- in a worst case- the borrower is in negative equity.
In 1993, Dr Satchell (Economics Fellow Trinity College Cambridge) studied the methodology behind the lender indices, concluding that even more information than was publicly available was required if any firm assessment as to the differences were to be reached. In 2001, we commenced development of our own house price index with Dr Satchell, which was launched as the FTHPI (Financial Times House Price Index), and is now the LSL Property Services/Acadata House Price Index. Dr Satchell- with Dr George Christodoulakis- designed the academic model used for our LSL Acadata HPI output- updated monthly in our LSL Acadata HPI- and which we have published since September 2003.
We also design new indices, and are able to prepare subsequent on-going monthly results, pending any desire of a client to do this themselves. Typically, we provide a Feasibility Study, consisting of a comprehensive review of all major house price indices, together with any new such index of technical interest, forming a reference document for internal client use. This Feasibility Study will include an appraisal of the available client data, methodology most likely to be suitable (e.g. mix-adjustment, hedonic regression or other), potential options and a projected timescale and costs.