shiningliao
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http://www.cityam.com/news-and-analysis/allister-heath/inflating-away-the-uk-s-national-debt
ONCE again' date=' the Bank of England chose to keep interest rates on hold yesterday. It is now looking like it won’t be raising rates until next year at the earliest. Forget about strict inflation targeting; its new policy appears to be to keep monetary policy as loose as possible for the foreseeable future, as long as inflation doesn’t breach an unacceptable threshold (say 6-7 per cent) and that pay rises don’t catch up too much with price rises. The goal is to keep the cost of borrowing down, depress sterling to boost exports, help those with big mortgages and turn a blind eye to rampant inflation, which is slashing the value of wages and savings (and thus cutting consumer spending).
The Bank’s approach – and the very different attitude of the European Central Bank (ECB), which will soon be hiking rates again – needs to be seen in the context of rival deleveraging strategies. There are three ways a country can cut its debt burden. It can actually pay back its debts – perhaps by selling assets, as Gordon Brown did when he auctioned off 3G licenses in 2000 for a ridiculously high £22.5bn and actually cut the national debt (not just the deficit). Such a fiscally conservative approach is that favoured by the ECB and the Bundesbank. Most of the time, however, actually repaying debt is too tough as it involves running a budget surplus, something politicians don’t have the self-control to achieve. The best they can usually achieve is to reduce the rate at which they accumulate extra debt to stabilise or cut debt to GDP ratios.
The second possibility is for a state to default by failing to repay some of its debt or by missing an interest payment. The UK, thanks to the coalition’s austerity policies, is not going down that route, unlike Greece and several other Eurozone countries. The US won’t either, despite its profligacy: it could always print more dollars if it ever were to run out of tax cash. Actual defaults are never painless: they destroy financial systems and impoverish citizens. By law, banks, pension firms and insurance companies have to buy lots of government debt, on the assumption that it is risk-free; default guarantees disaster. The default can be dressed up as a renegotiation or a reprofiling but the litmus test is whether creditors lose out.
Another, legally sounder kind of semi-default is to ditch off-balance sheet pledges to electorates. In many countries, public sector workers have been promised generous pensions, for example. The UK and everybody else will have to go down that road.
The third way to deleverage is to inflate away debt or to slash its value by engineering a devaluation. This is only possible for countries able to borrow in a fiat currency they control. Greece can’t do this as it is part of the euro and doesn’t control the ECB; its bonds are in a foreign currency. The UK and the US, on the other hand, can and are doing this.
True, the British government’s benefit payments go up automatically if prices rise, while index-linked gilts are fully protected from inflation, both in terms of their coupons and of their principal. But while these special kinds of bonds can’t be inflated away, 78 per cent (and rising) of outstanding gilts are not protected in this way against inflation and are thus losing 5 per cent or so a year of their value. Deleveraging is desperately important – it is a shame that once again so many countries will be taking the easy way out.
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http://www.rightmove.co.uk/property-for-sale/property-31745504.html
Current asking price is 315K. 2003 sold at 350K.
What you guys think about this property?
Location is Isle of Dogs, London. I don't really think the house price is now less than 2003 price. I think the last transaction in 2003 was a big dodgy....
Any comment?
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I'm struggling to find a connection between 'lavish' benefits and the fact that people who work full time cannot afford to look after their kids- surely the issue is that wages are too low for these people?
If every single benefit was stopped this would have no impact on the income of the low paid worker, would it? They would still be earning too little to look after their kids.
If not to work is better off than low wage work, then people will opt for not to work. Hence decrease tax income and increase benefit payout. This makes whole society getting worse each day... which is what happened in the past decade.
If low wage work is better than on benefit, people will opt for work. Hence increase tax income and decrease benefit payout. Again, less benefit payout will eventually (hopefully) lead to less tax. So the low wage work condition can be better. This makes whole society getting better.
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Or just take it off the Market if no one will pay you what it's worth.
this sums up what happen in last 12 month.
few sellers who doesn't need to sell urgently. fewer buyer wants to buy asap. result: price up with low volume.
when will this situation change?
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Hello everyone
Please be gentle to me as this is my first post.
Myself and wife have managed to safe a healthy 50% deposit ( lifetime savings) for our first future house which we intend to buy next year. Considering the current financial situation and what I have read on this forum over the last few days ( found forum week ago) I became really worried about my paper money sitting in high street bank doing nothing as well as its purchasing power which have dropped significantly over the last few months.
What would you recommend in terms of protecting our deposit over the next year or so? Is it still wise to buy some physical gold ??
We are prudent regular savers who don't want to gamble. We just want to save as much as possible and take little mortgage in the future.
Any advice will be highly appreciated. Cheers.
To play safe, shop around for the savings account. Instant access still have 2.75%. Fix for 1 year should have 3.0% +
Gold, it seems to me is sort of gambling giving the history high price at the moment.
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As rates, rise, prices will fall, but it seems to me that i'll still be looking at the same sort of house for the same monthly repayment.
This can be true if rates go up and stay up for long time.
What happen in the past was, rates raise to painful level, house price fall.... for awhile (let's say 1 year)
===> As you said, you still can buy similiar house because of high interest rate.
After awhile (say 1 year), the painful rates come down and house price... stay low!.
===> You can buy much bigger house at this point.
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Fair enough.
What do you suggest for UK PLC?
"The Ayatollah Buggeri" is right.
As for UK PLC, it's not Natonwide's responsibility. If there is responsibility. That's make Nationwide profitable, improve efficiency. That's what Nationwide doing.
If every company has to consider UK PLC, (using the example from "The Ayatollah Buggeri") then UK still using horse instead of cars because that's good for the employment - Hiring more people in the short term.
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One day, when an old dying boomer laying on the street... I am afraid I won't be the person to help.
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I'm afraid us (sensible saver.... or those who interest in HPC) is minority. Politician cannot hear voices from minority. They are busy kissing boomer's (majority) asses.
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Guys, gals, I had a bit of a moment of clarity today. In other words, I am throwing in the towel and have more or less given up all hope of owning a home in the UK. Reasons? Well, I have been doing a lot of thinking of late, having hit my 100K stirling savings target.
For a start, I simply could not believe the extent to which the government went to not only prop, but effectively boost, UK house prices. Quite frankly, I am disgusted. Not only this, I latched onto something today which I cant get out of my mind.
The housing market can self-sustain for a long, long time without a single first time buyer entering the market.
The market, having been killed off to first time buyers, is simply surviving off reduced transactions between boomers downsizing, and middle incomers, upsizing. They dont need first time buyer entrants, as they have just enough mobility and lending to support this. Those at the middle tier looking to upsize have significant equity and can easily do so, at massively reduced interest rates. The boomers can downsize easily still and live off the profits. Sickening. The trouble is, this situation potentially could go on for another 15 years.
Secondly, not ony has my spending power been destroyed internationally, but my taxes are being used to hold back the wall of unemployed homeowners sat in their homes. over 220K last count, through mortgage interest support schemes. Unless the government decide they can afford to re-house these families once they are reposessed, what will stop them rolling over this scheme? Its costing 'only' 1.4 billion estimated a year, they arent going to go and cut this scheme just to make my generation happy. Its going to get rolled over, because thats the cheapest thing to do.
Overall, I am completely gutted and quite frankly exhaused from work, from going over this time and time again. My wife is getting pretty p*ssed off too, so, I have decided, we need to move. I will be trying to get transferred overseas with work at the next opportunity, and when I do, I wont be coming back.
F*ck the UK and all those sycophants that have destroyed it from within.
Totally agree and I have exact feeling like you.
I am going to wait after election.. although I have a feeling nothing will change.
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I been reading the news about "bad weather" cause the house price drop......
How could this be possible? To me, "bad weather" only affect the transaction volumn. Not the price...
It seems some analyst is talking non-sense. Am I right?
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I was suggesting that you pay £50 a month in for the next 2-3 years until the market bottoms then transfer a lump sum over and keep it in there for six months and get the cash back. If you do this it is a good deal.
Actually, money in could take out immediately. As long as your last 6 months has 50,000. You can claim 5000 cashback.
4. After you open your account, the balance may fall below £100....
One thing worth notice is...
15.We may withdraw the cashback offer, provided that we notify you personally six months beforehand.
Pity this is for FTB. I wonder why could they find out if you had a mortgage in the past or not..
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Where is this 3% ISA?
I just checked the website, Santander only offer 2.75% at the moment. Have I just missed the 3% boat?
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The great housing firesale is just round the corner. In 12 months, you'll be able to buy on better terms. Honest!
Thanks, I think so as well and I won't buy any property before the election.
I just want to clarify Shared Ownership for what's bad, what's good.
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Indeed, most of the Shred Owevership are bad deals. However, I still cannot spot what's wrong with the following cases:
The previous owner bought 10% share in 2004 for 25,000 (Over priced.)
Rent on 90% share is £360 PCM.
Now sold (STC) for 38,000 (Extremely over priced... when looking at 100% price)
If you have no intention of buy all 100% share. Just want to live there.... and if you want to move on, just sell it again. This seems a good deal.
Any similiar property for rent will cost 750+ PCM.
No Service Charge because this is NOT a flat.
The only potential problem I can see are:
1). HA may increase the rent to maximum... (I dont' know what is the max. %)
- Giving the history of rent increase, this HA seems quite okay.
2). if you can't pay rent, HA will force sell the house in short time.
- This applies to all house owner.
Could this be one of the few original SO scheme?
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Derrick B | Tue, 10 Nov 2009 16:28 GMT
Shared Ownership is no longer an affordable way to buy property. Originally, Shared Ownership was introduced on the idea that you would buy a percentage and then pay a reduced rent on the portion that you do not own. With the bank interest rate being low and the HA’s increasing the rentals by their maximum increases every year, this is no longer an affordable way to buy a home. Future buyers should be warned. Shepherds Bush HA increased their rental portion by 6% this year during a recession!
If you are having financial difficulty and you find yourself in a position where you cannot afford to pay your mortgage + rent – perhaps after being made redundant, subletting temporarily until you get back onto your feet is not an option! The HA would force you to sell. You would be forced to pay a fee upfront for an approved evaluation from a pre approved list of HA surveyors and up to £300 for a HIP. You are forced to pay a commission to the HA for marketing the property, Your solicitor fees and the HA’s solicitor fees plus a few other costs so if you like most leaseholders only own a 25% share, You will probably walk away from the sale at a loss or having only made a VERY small profit. The HA who own the majority 75% share take the profit and do not contribute toward any fees related to a sale.
Leaseholders also end up paying very high service charges and have no say how the building is managed and most times it is completely mismanaged as is the situation with my building.
Shepherds Bush Housing are probably the worst HA to buy Shared Ownership from as it is now 1.5 years that I am waiting for defects to be repaired!!! They fob you off at every opportunity.
I am trapped in a situation where there seems no way out! It is about time that the rules of shared ownership are changed. It is about time that future buyers are made aware of these issues which are NEVER brought to your attention when you are looking to buy the property.
A 200K property on an interest only mortgage would cost me just under £1000p/m. Currently a 25% share is costing me £1200 p/m.
You work out which is the more affordable option and which option provides you with more freedom!
This is helpful information.
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Is share ownership house a good deal? I read some negative comments before, however, after my further calculation, it seems it's a good deal. Am I wrong?
Take an example in Milton Keynes, a 2 bedroom house.
30% share. Asking price £43,500 (100% price is £145,000)
The rent (or the interest on the capital) for the 70% share is £250 PCM.
This works out about 3% interest on 70% share (£101,500)
Compare to rent a similiar house in the same area. This is a good deal!
Am I missed out something?
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Quote me if I am wrong but they fell circa 20- 25%, this site was stating for a very long time that a 30% correction was due, so at 25% you're nearly there
25% HPC is fine if transaction volume back to normal. Unfortunately, people simply hold on and the price even creeping up.. for the last 7 months.
From a potential buyer's view, this means low price with very limited choices. Like reduced food in Tesco, bargain, but most of them are rubbish. You may get nice one only if you are lucky.
So, I am still waiting with finger cross. If no further reduction, at least more will be available later on.
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This is the thing I dont understand, there was a house price crash
Too less..... I don't even feel that was a crash.
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Now just to prove the point on stupid house inflation, here are the figures for my first house:
13/08/2007 - £249,950 43.2% up from the 2002 sale This is what my buyer eventually sold for.
21/09/2002 - £174,500 32.2% up from the 2000 sale This is what I sold for.
05/10/2000 - £132,000 This is what I paid.
So I bought the house for £132k, sold it on for £174,500 and then the people I sold it too 5 years later sell on for almost £250k.
So in 7 years the house has doubled in price. What is crazy is that this house was a pretty standard, though slightly above average FTBer type house, 2 bed, mid terrace and when I bought it, it was at a price that an FTBer could afford.
I believe I had a £30k deposit, which meant around £105k mortgage, which was easily affordable on my wages at the time (less than 2 times my first year salary in what was a new job). But the key thing is that someone of £30k could equally have afforded that house as they could have got 3.5 times 30k = £105k, assuming that they could have afforded the deposit which admittedly may have taken a bit longer to save.
Now the question is who would be buying at £250k?
Probably not an FTBer, as now they'd need a deposit of £37k minimum, but really they'd need more like £57k to have the same sort of position I had when I bought. Meanwhile they;d now need a mortgage of between £193k and £220k. So that would need a salary of £57k.
I am losing the faith on HPC... but stll hoping.
Most FTBer won't buy and can't buy this £250K property. FTBer will have to buy 1 or 2 bed FLAT. The living standard simply dropped. Just like people live in Victorian time have much bigger houses. Now we don't.
As long as population grows, new smaller houses, tiny flats will pop out for FTBer. sad....
I think no government will try to engineer a HPC. They will try to keep the house value and even try to introduce the artificial inflation. Unless, government lose control.
Sadly, I am hoping government lost control in near future and have no choice but put the interest rate sky high.... to HPC.
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0800 number for telephone banking access and also internet, currently 3.3% interest, one of the best with instant access.
however, be careful if you accidentally send money to an external bank or internal Citibank account where you don't have sufficient funds, then £25 penalty charge. probably applies to other savings banks also.
Yes, that's the best deal I can find at the moment. Specially among the "instant access" type.
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I have just booked cheap flight tickets with RyanAir. They charge per person per flight £10 for using credit card!!!
The only free of charge card is Visa Electron card. So I decided to apply one. After submit the application form, Halifax
website says they are extremely busy for the EasyCash account applications. I wonder why...
The EasyCash Account is sort of basic, minimum bank account you can get. However, that's the only account you can get a Visa Electron card.
Why RyanAir only not charge fees on this type of card? I don't believe the banking cost ********....
I think the main reason is RyanAir figure out the person who have such type of bank account do NOT travel. So they choose this type of card is free (I think they cannot charge fee for all type of cards, otherwise, they break the law by cheating...) Therefore, RyanAir can make the most of money...
Anyway, this is what I discovered, what's your opinion?
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First of all, is Milton Keynes belongs to South-East? or East-Midlands?
Any one familiar with Milton Keynes area? I would like to know where is nicer carea in general. Where is the area that I should try to avoid. (For example, council estate area.)
I am going to rent a 2 bedroom house first. Any comment will be appreciated.
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Congratulation!
It's great to see your assumptions of the future economy and putting your plan into action.
For me, I am still waiting....
I believe, the house price crash this time would be a long bottom 'U' shape instead of 'V' shape. House price will stay low for long time after it hit the bottom.
Base on this assumption/prediction, low price will stay low for long time to let everyone knows. No need to jump in hurry.
Hopefully, fortune favours patience.
Sacrificing Savers - Short-Term Politics Of Long-Term-Pain
in House prices and the economy
Posted
Government always love inflation. Inflate away nation debt, push more people to higher band of tax. Less debt, more tax income!
Savers, what savers? Saver's vote are limited. There are much more votes from people on job seeker's allowance.
http://www.cityam.com/news-and-analysis/allister-heath/inflating-away-the-uk-s-national-debt