Thursday, Jul 01, 2010
Please sir can we have (print?) some more money to fund higher house prices?
Daily Mail: Warning of second credit crunch as lenders predict loans will plunge over next three months
Britain could be on the brink of another mortgage drought, the Bank of England has warned, as fears grew of a 'second credit crunch'. Lenders could be facing a major funding gap because of the the bank's £165billion 'special liquidity scheme'. It's predicted there will be just £15billion of net mortgage lending this year, compared to nearly £110billlion in 2007. House price crash here we come! Let's hope businesses do not struggle because the banks may prefer to lend their remaining pennies to home owners in order to keep up the value of their over-inflated property assets.
Posted by miken @ 09:04 PM (2218 views) Add Comment
35 Comments
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1. mark wadsworth said...
By Daily Mail standards, that's quite a well informed article. My favourite bits are this:
But any mortgage squeeze is likely to enrage taxpayers, whose money was used to rescue banks including Halifax, one of Britain's biggest lender of home loans, and Royal Bank of Scotland.
No comment required, and of course this:
There would be a knock-on effect for anyone who needs to sell their home if potential buyers back out because they cannot get the financing.
Which again needs no further comment.
2. Crunchy said...
stillthinking, the reason for the £5 cash machine downgrade. Look after the pennies when times are hard.
Recaptcha 'restrain optimism' Uncanny!
3. markj69 str05 said...
There is no 'mortgage squeeze'. Just a return to sensible lending criteria. Banks will not lend against assets which are going to drop in value.
We'd better all get used to this for a few years yet. And all those home owners, especially those with large mortgages better start to realise that they were suckered into the 'buy quick - house prices will always rise' scam, just so that banks and bankers would realise a quick bonus!
4. Dbc Reed said...
Isn't there a stress-testing exercise going on where banks try and evaluate what will happen if house prices fall, among other things?
5. Jrhartley said...
We all know that deflation will not be allowed to happen on any significant scale. Why? Because obviously its completely game over at that point - if you think something is going to be cheaper in the future, you'll defer purchasing and the machine completely breaks down. So if there is any meaningful sign of delation, its back to as they've always done since coming off the gold standard - run the presses. It handily erodes all the sovereign debt too, and it conveniently continues the trend of transferring wealth from the prudent to the reckless.
I think its a brave person who bets against global governments doing any different this time than to what they've always done in the past when faced with a debt crisis. Inflate, inflate, inflate.
6. Uncle_monty said...
"There would be a knock-on effect for anyone who needs to sell their home if potential buyers back out because they cannot get the financing."
......Still the Mail cannot bring itself to actually mention the prospect of FALLING house prices.
7. bluebeach said...
Right then...... this can only mean....more QE.........mega low interest rates for much longer.........
people will just stay put....... just like they have done for the past two years.... why move......
let the savers take the hit........
All equates to the onward march of house prices and more moaning from the
losers on this site......
8. techieman said...
"this can only mean....more QE.." - yesterdays medicine.
".mega low interest rates for much longer" quite possibly...
" why move" - because some people have to... and since prices are determined at the margins, HPs will probably fall without any assistance from low IRs.
"losers on this site.." ambiguous care to clarify?
9. bluebeach said...
The losers who sold in 07/08 ..........well expecting to be in a bargain basement property by now with shed loads of cash.... feeling very good about themselves......
but thats not the case is it...... still waiting... still moaning about the governments meddling....still bitter at those who pay next to nowt on their mortgage..... theyre robbing the savers.....
those losers
and dont say that they dont exist here.....cos they do in plenty....
10. techieman said...
right... oh those losers,,,
thanks for clarifying. I seriously didnt understand what you meant. OK well it sort of does depend where you are... i dont know if you saw TCs postings the other day, but he says in Wales stuff is 40% below peak. In the south east we are apparently not far from the top, but thats no surprise is it given massive stimulus, (i am actually surprised at the Welsh numbers). Property is illiquid, normally long term and regional. I understand you applying previous straight line extrapolations since the governent has "saved the world".... Like fixing an amputation with a big plaster which they are going to have to (gently and slowly pull back).
Thats gonna be sore!
The point was they tried to kick start stuff so the rest of us took up the slack.... but we havent have we.... and they know it.
11. happy mondays said...
Nice analogy techie...
RC loan munchers
12. p. doff said...
Techie. I don't know what it's like in TC's part of the world, but in this part of Wales (North) falls are minimal. Mind you, I have seen stuff on the market at around £600k eventually selling for £420k, but that's because the asking prices were detached from reality in the first place.
13. bluebeach said...
where in NW p.doff?
14. estrader said...
FTSE 100 - Origins & Facts
1) What is it?
The FTSE 100 is an index of the 100 companies that have the largest market capitalisation (i.e. those with the highest present value) of all companies listed on the London Stock Exchange.
2) Why is the FTSE 100 important?
It is seen as an indicator of *success of the British economy.*
3) The FTSE 100 is arguably the leading share index in Europe.
It is rumoured to account for around 80% of the UK share market.
The index is now DOWN at a level it was around 13 years ago, which is just about the time Labour came into power.
It is down even though BOE printed more money than it ever has in recent British history.
But, that is a stock market fingy and wot the public only cares about is wot their 'ouse is worth...because 'ouses (apparently) are the engine of the British economy....
15. str 2007 said...
Hi Bluebleach
Yes I'm a current loser and winger. Totally unexpected to me that the bailout would be on such a grand scale.
However, if money/currencies have any value atall then constantly printing extra will eventually end in tears (maybe mine).
Gold and Silver were down yesterday so maybe someone thinks they won't continue printing fresh currency.
It frankly seems remarkable to me that are continuing and that people are still spending (check out your local Apple store or o2 shop).
Speaking to several friends of mine with their own businesses, most are quiet if not completely dead.
Up until now I'm not sure anyone believed in the 'credit crunch'. I think they're about to find out.
One business in particular is in a situation where by the £180k overdraft is being called in when the business actually needs more money for its cashflow.
This must echo across the country where by small businesses backed up by house equity (and availablity of that equity) have been able to survive.
I think that's about to end.
Personally I'm concentrating on getting in outstanding monies and not really looking for fresh business (just work from reasonably trusted sources).
My gut feeling says things are about to turn bad and I also sense most of the government ammo has been used.
FWIW my opinion is that if things had been allowed to correct (from 2007) and stimulus was now gently applied no, we would be seeing 'proper' growth within the next 24 months.
The fact that there's no ammo means it could be a really long haul back to any sort of 'proper' growth.
16. Happy Mondays said...
@ estrader & if it keeps falling, will it go into a death spiral as investers lose confidence? simultaneously bringing down the housing market or will investers pump money into bricks & mortar?
RC Great fallsahead
17. bluebeach said...
str2007..... well I kinda agree with what you say....an honest view of yours.... there is a denial in most peoples minds..... perhaps the truth in just around the corner....
18. mark wadsworth said...
In the spirit of rising to BB's bait, we did sell in December 2007 (we started selling off our BTLs a couple of years too early, but hey) and we have an embarrassingly large sum of money in NS&I which (even at a derisory interest rate and after income tax) pays a bit more than half the rent on a very conveniently situated house, so our net rental cost is about 1.5% of what our house would sell for were we stupid enough to buy it.
Provided prices fall > 1.5% a year in nominal terms, we are winners from all this (and houses on my street are down about 15% from their "peak asking prices" of 2007/08). Plus I had other personal reasons for moving, which all happened to converge in late 2007.
19. jack c said...
I thought I'd throw this into the mix which (IMO) emphasises how mental things have become
Banks write off billions in debt
UK banks and building societies wrote off some £9.6 billion of loans to individuals in the 12 months to the end of quarter one this year. Data from Credit Action shows that loans to the value of £2.13 billion, £1.25 billion of which was comprised of credit card debt, were written off by UK financial institutions over the first three months of the year - the equivalent of £23.35 million a day. Total personal debt in the UK at the end of May stood at £1,460 billion, a figure that has grown by 0.9% over the last 12 months and is more than the country produces over the course of a year. The rate of acceleration in household debt has slowed considerably. It is currently increasing by 0.06p a day, down from £11.11 a day in January 2008.
SOURCE - Mone£acts 02/07/2010
20. techieman said...
Good summary STR. Yes the bullets have all been used, but the mysterons keep coming back!! BTW that Dent webinar was in January 2009. [although i only saw it recently] Sort of predicts it all really - in general terms. I know its a bit long but did you manage to watch it all?
Ah the FTSE ... takes me back to the days when it was first introduced and i was a blue button, on the traded options piece of the LSE floor. We got badges saying "play ftse". Probably chucked mine at someone years later when i took the odd bath! :-).
pdoff - i obviously cant comment on TCs position, but it sounded a bit out of kilter... but then again i dont get out of the smoke much so have to take this stuff at face value.
21. timmy t said...
bluebeach is right - the winners are those jack c mentions who got their swanky lifestyles on plastic and then just asked to have the whole lot written off. They're tw@ts but they are the winners.
bluebeach is wrong in implying that we shouldn't moan though - if we all just rolled over and let stuff happen we'd be shafted even more.
22. str 2007 said...
techieman
Yes I think I watched all of it but assumed it was more recent.
I was therefore thinking these falls would be bouncing back up agin before bigger falls.
But in actual fact this (in their opinion) caould be the start of the big falls.
Have I got that right, or do you see some recovery from here before the big falls they talked about in July August ( I assumed they meant this year not last year).
23. p. doff said...
B'Beach. Ynys Mon.
24. str 2007 said...
On the subject of high house prices
I've been browsing/dreaming on rightmove recently and can't help wondering why a younger (more it astute) FTB generation aren't flocking to the likes of Brittany, France for example.
For the price of a 3 bed semi in the South East you can get a proper faily home (that would 3/4 - £1m here) or indeed a very nice family home and enough left over for a yacht and a plot of building land.
As alot of IT jobs now seem to be able to be doe on line and I assume anywhere with reliable broadband, is this going to be yet another pressure on IMO unsustainable UK house prices.
But at the cost of our younger generation moving abroad.
Certainly I for one would be looking to expand my existing and/or start another new business, but the lack of available freehold commercial property and the cost of renting someone elses with the addition of frankly outrageous council tax pretty much kills stone dead any business plans you put together.
25. bluebeach said...
P.doff........ well in the chester/ wrexham border.... there seems to be an epidemic of... 'well if you think your house is worth x amount... then mine is worth more'..... without basis of reason... it seems detached from reality.... as str says....how can this go on.....no logic....but they keep on buying.
26. techieman said...
str :
http://www.youtube.com/watch?v=AEsAjYXlLuI 2010update
you are basically right he was talking about a recovery in 2009 going into 2010, but then falls, to retest the lows . The new vid is about more specifics. its worth watching the webinar imo if you are interested of course.
His premise is that the baby boomers are past the age at which they keep spending more and more - i.e. from ages 46 onwards their spending is reduced. Therefore eventually their spending will not be replaced and the main driver of the economy, once the stimuls has run out, will be in decline. I just found that analysis interesting.
27. timmy t said...
str@19 - that's a really good point and something I've thought for a while. It's only a matter of time before companies are incentivised through tax breaks to have flexible working policies for environmental reasons, and when they do, living in places like the south east will be less important. It should help to even out the regional imbalances we currently have at least.
Recap - razzing tax!
28. growler said...
@ bluebeach. I've noticed the basrs and clubs in this part of the world are getting a bit less full. It's like the recession wasn't happening in somewhere like nantwich - but now is.
I also sold in August 2007 but for the first 2 years had very good interest rates as I fixed high rates. Now less than half the interest meaning the rent I pay is now not covered. Even at over 50% deposit, It would still cost me a shed load more to buy per month plus all the outgoings, so financially, it's a far better idea to rent. Had I have not sold, I'd be out of pocket on my equity and paying more a month.
Ironically, the lower the deposit you have the less the opportunity cost of lost interest on savings. Strange that having less deposit makes a buy decision more favourable than a rent one.
I also think unless there is another shot to the brain, we're going to see a slow and long erosion of property prices meaning renting will be a better idea. I look at the differential between interest in the bank, monthly outgoing buying over renting plus the loss of capital value. Of course, you can argue about exactly what the property price is doing, but against a benchmark property in my South Bucks area, I don't see appreciation but about a -5% trend over 3 years (more in the beginning, less now).
Since I think we cannot be looking at growth for at least 3-4 years and can see IR going up in the period, it will be a better decision to rent going forward.
Oh for some hindsight if I could time travel :-|
29. Skeptical First Time Buyer said...
The FED will QE
recaptcha: enormous millions
30. str 2007 said...
Hi techieman
Yes, I saw that video the otherday and it was this reference to a Dow 11300 - 11800 peak between June and August to which I was referring.
Has it arrived on the early side April/May or is it yet to come. The video was made 11th May so I assume that in their opinion it is yet to arrive and therefore we see a recovery from here over the next few weeks and then big falls.
Do you have an opinion on this.
(They talk Dow and I know you tend to talk S&P which I understand is more balanced and is in closer crrelation to the FTSE)
Would you expect these three markets to remain in fairly close correlation to one another if there were big falls ?
31. techieman said...
STR [was waiting for the numbers]
he posted this on May 11. After the May 6th Flash crash. He says that there will be one more rally, after the May 6th fall for new highs (he means to go above the 11260 Dow high in April). To date he is wrong. Do i think he will be right?
Well nope - i do think we have a rally soon (we had the start of falls in the USD) we will probably try to get back up toward the neckline of the H&S - but having said all that i am not a subscriber. I have 10% left of my short position but will add to that after (sorry IF) the dollar falls some more and the stockmarket recovers a bit. Of course though he could be right about these new highs - but to me it sounds like he might have revised that because now for substantial falls in July and August (which look like that might happen after we have this rally) there just isnt enough time.
I will give you a video re the dollar : http://www.elliottwaveforex.com/2010/07/01/usd-index-forex-elliott-wave-analysis-%E2%80%93-29th-june-2010-video/
and a chart re the S&P market.... http://2.bp.blogspot.com/_TwUS3GyHKsQ/TCz4mStS7DI/AAAAAAAAGIg/hmjfGPI1r0I/s1600/spx15.png. therefore here (its a 15min chart) we are looking for the (pink) IV up followed by the pink V down to complete the green [1]. The alternative is we have already had the green [1] at 1010. Then we have the green [ii] which my best GUESS is for around 1080, after that its green [iii] down.
Personally re Harry D - i wouldnt get too excited about his market forecasts - as we discussed before. doing that is just a hiding to nothing really - but i think his macro analysis is very good.
I think the correlation is pretty good - there is probably something on the Internet that calcs that.
Good luck str!
32. estrader said...
@str "Would you expect these three markets to remain in fairly close correlation to one another if there were big falls ?"
YES, always.
Go to:
http://finance.yahoo.com/
Enter FTSE 100 in the 'Get Quotes' box on the top left and select FTSE 100 in the drop down.
1) Click on the chart on the right side of the page to get the interactive chart
2) Click on 'Compare' option along the top
3) Select Dow and S&P checkbox
You can do this with shares as well.
Is this what you wanted to see?
33. str 2007 said...
Hi techieman
Wow that Lara birds a handy one to know. Not sure if I could stay awake over a candle lit dinner with her (more your sort of conversation I guess). But when the talkings finished weh hey....spoken like a true shallow person.
I wonder if she does her own analysis or someone decided she'd be a better face for subscriptions. Ah well who cares, so long as the numbers are regularly in the right place, seems like fair value for $10 per month.
As for the other chart, is that from Elliott Wave aswell or your workings. I can't quite work out how the target box for early next week is arrived at but 105-1046 early part of next week before more falls to below 1000. Will be interesting to see how that pans out.
Thanks for that.
34. str 2007 said...
sorry should have read :-
at but 1035-1046 early part of et week
35. str 2007 said...
Estrader
Thanks that's excellent.
Yes they all follow very closely, but all things being equal (and assuming their charts are correct) then the FTSE seems to show greater falls as a percentage.
The reason I asked the question is that I was wondering which was better to concentrate on from a trading percpective - other than the trading time zones. The Dow is always quoted yet I get the impression that more notice is taken of the S&P.