Tuesday, May 25, 2010
Changing the rules - why predicting the HPC is so difficult
Mish: Insanity Down Under: ING Says Thanks to Capital Appreciation, Paying Principal on Mortgage Loans is Unnecessary
This is not a UK article but I offer it as a an example of why logic doesn't work when underlying assumptions about markets can be changed. Repaying the principal on a loan is an outdated concept according to ING. If a major bank is prepared to countenance this type of investment strategy, it's little wonder timing the HPC is so hard. In the UK, we've seen 1/2% interest rates, tinkering with the normal repossession rules and the perhaps adding property costs to the CPI, by the ConLibs, to keep the party going. How many more wheezes can bankers and politicians dream up to support property prices?
Posted by quiet guy @ 12:20 AM (711 views) Add Comment
5 Comments
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1. Rentersecondclasscitizen said...
Banks in Lithuania are inviting hard-pressed mortgage holders to re-mortgage for a 30 year period as opposed to the normal 25 to avoid repossession. No doubt coming to a Bank or Building Society near you. When that doesn't work, no doubt we go inter-generational ! Houses will fall in value but will we ever see one available to buy ? The privatisation of profits and socialisation of losses is also taking place for homeowners in this country because if you are unable to pay your mortgage the state does it for you for a time ! Try not paying your rent and see what protection you get ! This is my first post after accessing this site daily since 2005. I know about when the last bear turns bull but I despair ! I am no longer in a position to buy after having been a house owner for 20 years prior to Feb 2008. I weathered the HPC of 1989 to 1993 with no help from HMG and that was with a 100% mortgage. I obviously would not want to buy at the moment but The Crash should be in full swing by now. Where is this recession for the homeownerists ? I was at Silverstone at the weekend and it was packed. No shortage of people spending £129 to drive sports cars around the track. I live in South East Essex and every garden centre is rammed at the weekend as are the restaurants. Where I live, at least three houses now have bright shiny new conservatories which have been erected in the last three weeks and there are many high-end cars that are brand new ! It seems tomorrow never comes ! Where's The Tunnel ?
2. Positivo said...
I think that Koch only cares about the short term gains ie: His and his staffs bonus. If it all goes pear shaped and the bank struggles, just like Sir RBS he will bugger off with a nice pension to keep him sweet for the rest of his life.
After living in Australia for 17 years I know there is are lot of 'desperate' people who want to own a home and will do this just to 'have' one. This is now the world we live in, first world counties with desperate people wanting what every citizen should have access to, there OWN home.
3. mountain goat said...
Great post thanks.
It is mad but in a way just takes current madness to its logical conclusion. The US government already owns most of the mortgage debt in their country. Bank's capital is also mostly mortgage debt. So mortgage debt is acting like gold used to when we had gold backed currencies. So in this system by creating more mortgage debt we are becoming wealthier! By paying the mortgage back we are destroying wealth.
4. mander said...
May I ask why in Australia are houses so unfordable? Is it a crowded island or there is not enoungh land or it is just simply wealth creation?
5. rumble said...
"This is my first post after accessing this site daily since 2005."
-- Ah, I remember 2005, when I too found this site, I was about to become an FTB...
"explain wolfing"