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Bank Of England Inflation Report


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HOLA441

It's already been mentioned that HPI took off following the flight from equities in 2000/2001. I think it's possible that in the long/medium term (real) house price falls could benefit the economy by causing investment to return to the stock markets where it can be put to more productive use. I wouldn't be suprised if this is happening already, the last 12 months has seen flat house prices, but the FTSE250's risen nearly 20%.

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HOLA442
I sincerely hope you are right. Helping to achieve what you want by continuously talking down the market, resulting in something much, much worse than how things are today would not be a legacy to be proud of would it?

Um, I might be dumb but isn't the situation that we're currently in going to be recession based regardless of whether house prices drop or not?

Basically everyone has spent their imaginary money based on HPI, and FTB's have to save oodles to be able to afford to buy, that's if they're not in debt up to their eyeballs from living life on their credit cards.

So, we're all either broke, or saving like crazy. Sounds like we can't avoid at least a short period of recession regardless of what house prices do?

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HOLA443
I sincerely hope you are right. Helping to achieve what you want by continuously talking down the market, resulting in something much, much worse than how things are today would not be a legacy to be proud of would it?

........ this is a bit like the Krusty Allslop 'poison in the water' classic quote.

Come on, 4,000 people on an anorak forum is gonna make a difference to the national housing market?

Yeah right! :P

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HOLA444
So when inflation goes up and rates stay the same and then go down again in Oct/Nov perhaps you will begin to understand that the housing market is the number 1 priority as far as the BOE is concerned.

Perhaps you ought to email the BoE as I did.

This is part of a reply given to some questions I asked , dont see the housing market mentioned as No:1 priority anywhere in the reply I was given.

I thought you might find it of interest if I explained our role in setting interest rates and what we are trying to achieve.  The MPC here at the Bank has the responsibility for setting interest rates to meet the Government’s inflation target of 2%, as measured by the 12-month increase in the Consumer Prices Index (CPI). But, in setting rates, the Bank cannot look at one part of the community alone.  We have to look at the nation and the economy as a whole and identify the right rate of interest that will enable us to meet the inflation target.  I can assure you that the decisions taken by the MPC are made solely to meet the inflation target and are not made in order to benefit or disadvantage any one sector of the economy or community.

The Committee has to set interest rates to ensure that the overall level of demand in the economy is consistent with what the economy can produce – its productive potential – thereby containing inflation at a low and stable level.  I am sure you can appreciate that judgements on interest rates are always difficult and are taken only after very detailed and exhaustive analysis of the state of the economy and the prospects for inflation.  When the Committee meets each month they look at a wide range of data and information from many sources such as consumer spending and borrowing, investment, exports, employment, wages and other costs and prices before making decisions about interest rates.  There are some factors that may in themselves point to higher interest rates, while others suggest lower rates or no change.  I must stress again that it is a balance of all factors and the overall outlook for inflation that the MPC has to judge.

D :blink:

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HOLA445
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HOLA447

Nodumsunreader,

Judging from your original posts, you seem to be under the impression that the BOE has been taken by surprise by the slowdown in HPI and are desperate to take action to remedy it.

May I direct you to the BOE 2003 (Feb) Inflation report and Central Projection Forecasts, in which you will find, under housing, the BOE forecasts HPI to be zero two years hence. i.e. 2005/2006.

So, far from being surprised, they knew it was coming! In fact they carried on raising rates to facilitate just that.

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HOLA448
You stole that quote from the New Zealand PM when he commented on the NZ "brain drain" to Australia. However, speaking as an Englishman, I would agree, you are a bright lot, and it is a funny quote.

I cannot vouch for the originality of the truism but all my lifetime it's been associated with Scotland/England. Of course both Australia and to an even greater extent NZ owe a sizeable portion of their cultural roots to Scots so perhaps the NZ PM was drawing on something from the mother country.

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HOLA449
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HOLA4410
I sincerely hope you are right. Helping to achieve what you want by continuously talking down the market, resulting in something much, much worse than how things are today would not be a legacy to be proud of would it?

Contrary to your opinion, we are not talking down the market, we are talking about the market.

What's occuring is a result of poor economic management and a lack of desire on the part of the accomplices for any balance or leadership.

We are an aware minority.

What are you?

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HOLA4411

nodumbsnreader,

There are a few inconsistencies in your bullish position:

1) the affordability argument is bunk

e.g whcih is better, a 50K mortgage at 15% interest,

or a 150K mortgage at 5%?

For an interest only mortgage, indeed the monthly repayments are the same,

BUT the capital repayment for the first is 100K less :D

So give me a 66% HPC and 15% interest rates please:D

2) You claim that you don't care, and them say that a HPC would make you better off.

Why is that? Not relying on our bricks and mortar to fund our pension are we?

3) The real acid test:

Could you, on your current salary afford to buy your current house at current market values?

(Let's exclude savings and spare everybody that 'I'm allright Jack, I got 500K in the bank' line)

The answers woudl be most enlightening

ABB

Edited by AgeingBabyBoomer
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HOLA4412

And another thing........

Our economic history is riddled with recessions.

For god's sake if the inevitable is looming let's have the damn thing, get over it and move on.

Is it necessary to prolong it and make the outcome even worse?

The egos of two men should not be allowed to ruin a nation.

Edited by Culpability Brown
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HOLA4413
Guest The dude
misguided their intent may have been, but shoring up house prices at that point was what they wanted to do to keep things going.

Well they've failed...where I live in Cheshire, the number of properties for sale is astronomical. Problem is nobody's buying 'cos they are so overpriced....Let 'em rot as far as I'm concerned...

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HOLA4414
We are all seeing the slow agonising death of an economy that has cut down drastically on manufacturing and relied on the short term benefits of speculation.It is dawning on boom mongers quicker day by day that you cannot base any more value on this house of cards.The majority of the investors are gone and there are precious few ftb's that can command the amounts needed to even scrape in at the bottom.The differencial amounts of money needed to move up any further for anyone who owned prior to all this madness have stretched everyones budget to breaking point and still we have pointless tripe coming at us from the likes of you that everything be sustained still further.

The amount of business that surronded this bubble coming from the likes of builders and diy stores, let alone all the equity release firms and banks are all running for cover now.Profit warnings,repossesions,estate agents going bust and consumer spending drying up are but a few of the major indicators that we are going in a distinctly different direction from now on.Always harder to pay back debt than accrue it and no-one wants to look any-one else in the eyes these days because we really don't know how bad this is going to get.

Correct - the house price boom is over and the demand it brought in the economy has dried up. Interest rates falling will not return us to the "good times".... because there is a natural ceiling on what debt people are ABLE to live with . The cost of debt ( rate of interest ) is not the only driver here - there is debt repayment itself ten added to this ...

businesses being squeezed by higher input prices and lower consumer demand - job losses - deflating consumer confidence , Higher household bills and taxes. Weaker global recession.

House prices are so obviously overvalued and no longer represent a good capital investment. BTL are drifting away and FTB are squueezed out. It wont be a crash but it will be a steady substantial reduction. Let the market speak for us

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HOLA4415
Well they've failed...where I live in Cheshire, the number of properties for sale is astronomical. Problem is nobody's buying 'cos they are so overpriced....Let 'em rot as far as I'm concerned...

Cheshire house prices - especially Altrincham and Knustford and Bowdon will come down soon. Just wait and see

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HOLA4416
It's already been mentioned that HPI took off following the flight from equities in 2000/2001. 

But my house in Greenwich more than doubled in value from 1996 to 2001, and rose only slightly thereafter.

There are a couple of factors at work here.

A ) London leads the national housing market, so price trends are seen there first, and "ripple out" to the rest of the country. So you will have seen price rises much earlier in Greenwich than Ted D Bear would have in, say, Wales.

B ) Ted D Bear is also correct, in that national house price inflation only really started recording staggering, unsustainable price rises post-2000 (in Jan '03 annual national HPI stood at well in excess of 25% p.a.!!!!!!)

http://www.mortgage-express.co.uk/pdf/EconomicMay05.pdf

See graph at the bottom of page 2.

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HOLA4417
Seriously tho, what's the betting that some dumb **** thinks they can claim capital losses on the basis of EA valuations at the peak? There's gotta be one.

Found one! An Aussie though I'm ashamed to say!

High flyer - our current IP (yes, it used to be my PPOR) IS actually for sale. Won't pay any CGT (if it sells soon), in fact will make a loss, because it was at it's peak value at the time I started renting it out. So that's good, and even better that I can use this capital loss to offset any future capital gain

from Propertyinvesting.com

IP = Investment Property

PPOR = Primary Place of Residence (CGT exempt in Australia)

CGT = Capital Gains Tax

So this muppet was actually going to claim a capital loss for tax purposes based on a valuation she had done when she shifted out at the height of the boom... despite making a capital gain.

:lol:

F.

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HOLA4418
But my house in Greenwich more than doubled in value from 1996 to 2001, and rose only slightly thereafter.

Yes, I seem to remember prices starting to rocket at an extraordinary rate in the middle of 1998. Praps the boom of the late 90s might have run out of steam if it hadn't been for the 2000 crash, who knows. Well, someone, probably, but not me!

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HOLA4419
........ this is a bit like the Krusty Allslop 'poison in the water' classic quote.

Come on,  4,000 people on an anorak forum is gonna make a difference to the national housing market?

Yeah right!  :P

Quite right, Auntie!

Nodumsunreader, it's no good getting all schoolmarmish on us about 'talking the market down', as though that's what's causing the problem. The market is unstable because of the ridiculous amount of talking up that's been going on for the last few years. What, saying 'erm, prices are too high' is irresponsible but VIs on the telly saying that if people buy now they'll pick up 50% over the next five years isn't? You're having a laugh.

Are we going to have to put up with bullish types bleating on for the next 5 years about how we ruined their party? That's going to be really effing tedious!!

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