Thursday, Nov 15, 2007
It's the credit crunch, stupid
MoneyWeek: Why cutting interest rates won't save the housing market
The problems presented by the credit crunch mean that even if interest rates do fall in the New Year, we’re unlikely to see cheaper mortgages with them. The average mortgage rate stood at 6.02% in September against 5.91% in August and it looks like it’s already having an effect on the highly inflated housing market. But because of the Northern Rock debacle, the one that so embarrassed Mr King over a month ago, it’s an above evens bet that the banks have learnt their lessons when it comes to offering mortgages to the poor and insolvent. Now they’re likely to swing the other way, withholding mortgages from all but the most credit-worthy.
Posted by drewster @ 08:26 AM (870 views) Add Comment
7 Comments
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1. Orwell said...
I like that. If Swervyn Mervyn was to take a trip to his local supermarket he would sweat a little more...
He obviously does want to keep his job with Prime Minister (Crash Gordon) Brown , Unelect...
2. japanese uncle said...
Cutting base rate may well not serve the intended purpose at all, but surely kill off GBP. This may be the signal that friends of Merding King have finished betting on the nosediving GBP and soaring yen and Swiss Franc.
3. sold 2 rent 1 said...
They need to start cutting rates, exploding the money supply more, devaluing the GBP and causing inflation ASAP because of the £24b unplanned nationalisation of Northern Rock in 2008. The public debt is about to soar and this debt is trying to be inflated/devalued away. Remember the final stages of this 80 year debt cycle will see TOTAL debt levels go vertical before crasdhing down. Is this what we are seeing here?
4. doomwatch said...
I had to laugh at the hacked "news" in the London Evening Standard and Metro last night and this morning, saying
that interest rates were to fall in 08, based on some BNP Paribas analyst's knee jerk reaction to Swerve's comments.
It really is incredulous how transparently desperate these two "new papers" are to keep the London housing market afloat
when most free thinking individuals know it's a lame duck & and have smelled the blood.
5. Gbain said...
Interest rates are practically 8% now after the two year teaser.
6. drewster said...
@doomwatch, I don't think it's fair to blame the "newspapers". The free papers in particular just repeat press-releases and Reuters news feeds with very little change, so if Mervyn says black is white then the Metro doesn't even bother to question it, it merely prints a headline "Economist predicts black is the new white". It's only a free newspaper after all. This is part of the commodification of news partly caused by the internet.
The real villain is Mervyn for saying such nonsense and the BNP Paribas analyst who repeats it. The real question is, why does Mervyn want the market to think his next moves will be down?
7. doomwatch said...
drewster, I see your point, but my annoyance comes from the continued ability of so called journalist to hear what they want and print it; didn't
see much in the non-free Standard earlier in the week when all the bearish figures were published ?
Would it not harm to simply write something like "We think Swerve's talking out of his brown star fish, as oil is going through the roof ?"