Wednesday, Jun 13, 2007
Is this the end of the era of cheap borrowing?
BBC News: We're all doomed?
"...the rise in these long-term market interest rates pushes up the price of borrowing for our big banks and building societies and will probably feed through to the interest rates on new fixed-rate mortgages.
Which could prick the housing-market bubble."
Posted by njp @ 09:07 AM (146 views) Add Comment
4 Comments
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1. Darren said...
Read extract below, this is the real trigger for any crash. Now ...... why didn't any of you eggheads on this site pick up on this .... ever ? The whole point of all of us discussing anything on this site is to get an idea of what might trigger a housing crash that we all are painfully waiting for. I never did study economics of finanace but if i did then i am sure i would have noticed this. Something was sustaining low cost borrowing this was it. Now it looks like it has come to an end, hence Mervyn's warning yesterday.
Extract.
"Which is why what has been happening over the past few days is important, though largely unreported outside of specialist financial publications: there has been a sharp fall in the price of 10-year US government bonds, known as US Treasuries, and thus a precipitate rise in the benchmark price of borrowing for ten years. Yesterday, the yield on 10-year US Treasuries rose to its highest level for more than five years (to 5.27%).
This is much more important to all of us than what the Bank of England does to short-term interest rates.
For example, the rise in these long-term market interest rates pushes up the price of borrowing for our big banks and building societies and will probably feed through to the interest rates on new fixed-rate mortgages.
Which could prick the housing-market bubble."
2. Papabear said...
I found one of the comments on this article amusing (no doubt from a slightly panicking BTLer):
Not yet another ''reason'' for house prices to reverse (prick its bubble). I wonder how many times I have heard this over the last 30 years?
Prices may loose a couple of % - but look where they came from! £100k 5 years ago on average and £200k now. No-one is suggesting that position will reverse.
Where will they be in 5 years time? No-one knows for sure, but less than they are now? Not likely! [...] We have to move on and carry on.
Dream on, BTL boy
3. confused76 said...
Are we all doomed? I am not sure... we are not all property-owners-cum-huge-interest-payments
4. Realist said...
That's a good article from the BBC. Things will take a while (and maybe a major implosion of some kind) to register and feed through to stock markets and asset prices but it will happen - no doubt about that - because the cheap money era is over.