Tuesday, Jul 17, 2007
Not a crash, but
Scotsman: CML: dramatic house price slowdown
HOUSE prices look set to record their weakest increase since house prices fell in 1995 as higher interest rates bite, Council of Mortgage Lenders (CML) director-general Michael Coogan has warned.
The market will avoid a crash, but higher lending rates mean the two 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.Official data and surveys put house price inflation at around 10 per cent currently, but Coogan thinks the rate could be half that by the end of this year. Next year, prices will grow by only 2 to 3 per cent, he added
Posted by little professor @ 03:44 AM (165 views) Add Comment
3 Comments
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1. speculatorone said...
And yet today's front page of the Express says house prices are still rising at £50 a day? This was also in my local paper last night, very confusing signals. I remember it being like this last time round, people just didn't think prices were going to collapse. Experience tells me to sit tight and keep waiting!
2. uncle chris said...
You just need to look at the official BBC figures to see that house prices are in fact falling (despite the propaganda) in many parts of the country. Detached houses on the Wirral, a fairly well off part of Merseyside, have dropped 6.6% in the last quarter. Detached houses in Cardiff are down 9.7% on the quarter - try a few areas for yourself. The CRASH is underway and the desperate press releases by VI spokeman are starting to look like the antics of 'Comical Ali' - Americans, not here guv.
3. George Sore Ass said...
This is particularly bearish sentiment when you consider who is saying it. The vested interests such as EAs and mortgage lenders will never predict a crash or even prices falling, because that is basically saying "sit tight and wait" to potential customers.
No vested interested last time predicted a crash, in fact very few economists did either. Ditto for the USA's current troubles. Mainstream opinion said no crash, and now they have a crash and it is slowly sinking in that it's not going to get better anytime soon.
The problem with a lot of the predictions is that they're not considering the human factors; they think the market follows logic, which it might do only if all the players were economists who understood the rules. Firstly, they assume that people will make rational decisions, which they don't. So people will borrow more than they can afford, will not allow a margin of safety to allow for rate rises, etc. Secondly, people lie. If you ask them how much they're earning, they'll tell you what they need to tell you to borrow the amount they want. Few people realise this is fraud. So a lot of the banks are going to be rather surprised when they find out that their punters cannot afford their mortgages and are borrowing on credit cards to make up the difference. The banks are largely oblivious, because they have those people down as big earners and hence marked the mortgage as 'safe'.
Bottom line is that you only need to talk to your friends to realise how much bending of the rules has been going on. It's hidden in a rising market, but when things pass the peak, there are going to be some nasty surprises and the reasons for enforcing salary multiples will become tragically clear for many.
For the vultures like me, I'll just rustle up some popcorn, enjoy the financial Armageddon from afar.