Tuesday, Jul 17, 2007
CML: Not a crash... but will slow sharply
Reuters: CML chief says housing market to slow sharply
"House prices look set to record their weakest increase in more than a decade in 2008 as higher interest rates bite, Council of Mortgage Lenders Director General Michael Coogan told Reuters in an interview. The market will avert a crash, but higher lending rates mean the 2 million Britons due to come off cheap fixed-rate mortgages in the coming months will have to dramatically cut spending to keep up their monthly repayments, he warns" Landlord, read between the lines, in order to avert a crash folks have to tighten the belt... but why would I want to do that if I can sell at a 15% discount today and still make a shitload of money above the price I paid in 2000?
Posted by confused76 @ 09:10 AM (185 views) Add Comment
9 Comments
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1. sovietuk said...
Wishful thinking of the elusive soft landing. Unfortunately the world's financial systems have now spun out of control. There is simply too much money being pumped into the global economy for interest rates to remain where they are. Central bankers will have no choice but to hike rates. They will rise and rise and the current level of borrowing will simply just be unsustainable. People coming off fixed rate deals will not only get the initial shock of big rate hikes but they can also look forward to the monthly caning becoming progressively worse (and for a long period of time). Massive increases in repossessions, bankruptcies and the return of large scale negative equity unavoidable.
2. Captain Sensible said...
A interesting legal conundrum emerging here. All those with an inside interest in avoiding a crash keeping talking up the market (or, at least, are unwilling to talk it down). If (when) the market does crash and the BTL investors and others are facing ruin, there might be an interesting opportunity for a class action against those they might say they relied upon to stick with their investment. Probably a long shot that the courts would go with this, but if I were a pundit I would be thinking carefully before talking the market up in the face of the emergence of such signicicant contrary evidence - just in case!
3. Snipesnab said...
Now I am no expert but from what I can gather, mortgages are not the only dept that many people in the UK face. Surely when people come off their fixed rate mortgages + any other money on credit that they will owe, things will become too expensive to sustain. Many of us owe large amounts of money on credit cards and store cards, and then a mortgage on top of that! With the continuing hikes in interest rates, this is sure to stop first time buyers from deciding to purchase a house in the present economic climate. With a slow in demand for housing, decrease in consumer spending on credit and an increase in repossessions - is this not sure to bring the price of housing in the UK down??
4. Matt said...
All good economists realise that there is no such thing as a soft landing or fizzling out of a market.
The soft landing is wishful thinking and is use to alleviate panic in the market.
If there are no buyers for a similar property in a similar street,what is the recourse for the desperate seller?Lower the price.
What effect does that have on all the other sellers in that street? They lower their prices to compensate for the shift.
What happens whe there are still no buyers? Someone bottles out and lowers the prices again.
Ad infinitum,until the market is corrected fully,and becomes good value again.
The danger of this is the disapearance of financial services,sales cycles extending as consumers hold back.
The next crash will be epic,with mass unemployment and plenty of general misery all round.
To answer Captain Sensible, if we see a class action,who will pay?If there is nothing in the pot,then there is nothing in the pot.
All the spurious value adding companies will find their operations severely curtailed as the 'consultants' disappear rapidly.
Wake up.
5. wage slave said...
Next year, prices will grow by only 2 to 3 percent, he said.
If a VI is saying this then you can guarantee it's at the very topmost of the eventuality spectrum.
6. Dbnazz1 said...
Can't believe they are still pedling the 'soft landing'/'slowdown' line. That is another example of the world of spin, but pretty soon reality will be biting people very hard in the backside.
If rates go to 6% i shudder to think what is going to happen. I think inflation is getting back to more normal levels where it will stay, but the corresponding interest levels that go with this higher inflation will leave people in a big mess. Our economy is no longer built on sound fundamentals like having a broad base of industries from service to manufacturing, but instead is heavily focused in specific industries which will be heavily exposed to a downturn. can't see much economic good news on the horizon.
7. dbnazz1 said...
can't believe that they are still spinning the 'slow down' line. It just goes to show how much DIS-INFORMATION that there is out there.
With interest rates heading up and people with debt up to there neck, their will be large scale repo's, prices will slide and when prices start to slide those that were thinking of buying play at waiting game. This results in prices dropping further and so the whole thing becomes a downward spiral. and all that before you even take into account the buy to let lot. The smart ones within the |BBTL brigade are alreadt tip-toeing to the exit door.
I note today that there have been no comments from the Landlords Association today. I wonder if he has seen the news on interest rates and has been busy selling his portfolio.
8. planning4acrash said...
The Landlord isn't a landlord, he doesn't have a portfolio.
9. dohousescrashinthewoods said...
Keep your head down, make yourself indispensible at work and don't rock the boat.
Pay off every shred of debt you can and keep no assets. (If IRs are rising, you don't want debt and if houses, bonds and equities are in a bubble you don't want them either)
If you can get your cash savings out of the country too, that will avoid inflation, which looks to be clearly above RPI, if not get the best IR you can to minimise damage.
Seems to me holding a zero balance is the only way to remain unscathed in the coming years?
Maybe I should buy Swiss Franks, Yen and gold and stuff them under the bed?
(Incidentally I believe the smart BTLs long since left the market)