Thursday, Dec 27, 2007
Please sir, can I have some more rate cuts?
Times: More rate pressure as new mortgage figures plunge
"The Bank of England came under mounting pressure to cut interest rates as early as next month today as official figures from Britain's high street banks showed that new mortgage lending dropped by 43.5 per cent last month compared with last November." -- OH REALLY? I don't remember the bank coming under pressure to raise rates while the market was booming, why step in now?
Posted by drewster @ 01:15 PM (1032 views) Add Comment
14 Comments
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1. little professor said...
Exactly drewster - while house price inflation was raging everyone was happy for the Bank of England to exclude this from its calculations and keep interest rates low. Now that HPI is faltering, the want the Bank to intervene.
The MPC should stick to its policy of not taking into accounts house prices when setting interest rates.
The British Bankers Association revealed that mortgage approvals in November were down 44% from a year ago. This was the lowest figure on record, the second lowest being October's.
Meanwhile Bank of England data also showed that UK homeowners released £10.5 billion from the value of their houses in the third quarter of 2007.
The figure was £500 million ahead of the previous three months, reflecting growing doubts over future house prices and more expensive remortgaging costs.
2. hpwatcher said...
''while house price inflation was raging everyone was happy for the Bank of England to exclude this from its calculations and keep interest rates low. Now that HPI is faltering, the want the Bank to intervene''
Quite. Some people want absolutely everything their own way.
3. little professor said...
just trying to turn off the italics
4. Little Professor said...
ok?
5. little professor said...
is it ok now?
6. Andy said...
Really I wouldn't be surprised if (one of) the next big thing(s) for the BoE will be to determine inflation by including the value of house prices. As we all expect (nominal and real) house prices to go down and the government to expand the money supply by vast percentages and lower interest rates, I think it will do this while saying "inflation is low" by suddenly including house prices in the measure of inflation. Anyone else think this is likely?
p.s. I wanted to post this on the forum, but I can't post new things as I'm a new member :(
7. enuii said...
The in the final year of the last time labour were in power (1979) nobody would have even dreamed of 'releasing equity' from their houses. The then labour government threatened private companies with 'sanctions' if they gave pay rises of more than 5% and there was a 'concordat' between the TUC and the labour government that they (labour) would bring inflation down to 5% within 3 years. Needless to say that such desperate governmental drivel lead to Maggie getting into number 10 within 5 months.
This time round NeuLiebor have used Joe Publics super sized Mortgages and Maxxxxed Credit Cards to fund their stint in Power and the Miracle economy.
It may also be worth the younger folks getting their history books out and swotting up on such things as the winter of discontent, miners strike and the numerous public sector strikes of the late 1970's and early 1980's.
8. jack c said...
Good points raised guy’s – when you look at the BOE core purposes 1 - Monetary Stability & 2 - Financial Stability it is difficult to see how any further cuts in interest rates can be justified. The core purposes are obviously being abandoned in a desperate attempt to prop up the UK housing market, keep the tills ringing and stave off recession.
This has essentially now become a pyramid scheme and when the crash comes it will take down more than just the housing market.
9. backseatcrasher said...
the pound is dead, RIP
10. Icarus said...
Central banks have lost control (if they ever had it). Paulson's super-SIV was a crock that was never taken seriously, the Fed's latest rate cut simply puts downward pressure on the dollar and upward pressure on inflation. 'Liquidity injection' isn't working because banks need to concentrate on re-building their balance sheets and staying solvent. The fallout from banks' highly leveraged lending and excessive risk-taking has only just started to unwind. The BoE will follow the Fed and spend less time worrying about inflation and moral hazard and more time on desperate measures to stabilise the financial system. Yep, rate cuts it will be - but to no avail.
11. uncle tom said...
Despite abundant evidence that the market has run out of steam, and that prices need to retreat to sustainable levels, pundits who have no obvious axe to grind are still signing up to the notion that prices will either level off or fall by very small amounts next year.
I can only think that these people have the word 'shortage' imprinted on their brains, and have done no homework to consider 1) how large this shortage really is, or 2) to consider the financial circumstances of those who need better housing.
The answers are 1) not that great, but lack of control over our borders makes exact calculation difficult and 2) Dire - most 'housing need' - as defined by the govt's researchers - is for people who could not afford a property - even if they were half the price.
The market has become utterly dependant on speculators, and as they head for the hills, a small fall in prices next year is without credibility, as vendors vie with each other to entice one of the few buyers before the value of their property falls further.
Could the BOE take steps to bring the speculators back to support the market? In theory, this is not impossible if they acted quickly, but the measures they would have to take would be hugely controversial. My guess is the BOE will not contemplate this until it's too late - it may be too late already...
12. The Xyy Man said...
It's been too late for at least two years - only the "greater fools" that are the amateur BTL brigade have kept it going.
The BoE can do whatever they want - the crash cannot be stopped, and postponement tactics can only slow it down.
As the engineer bloke in "Titanic" said, the pumps buy you time, that's all...
13. dohousescrashinthewoods said...
Quite right Uncle Tom. "Even if they were half the price" - it would still be too expensive. It would still be above the 3 - 3.5 x salary sustainable elvel.
14. deepak said...
Free money, Free money any one for Free money.
Yes the banks who made 40 billion in profits this year. Really hard times. :)