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Posts posted by vzzzbx

  1. So what happens when house prices do fall? Let's apply a little logic and see where it gets us, shall we?

    Let's say for example Billy the Punter got himself a house for £200k on a 90% loan-to-value basis. So his mortgage is £180k. House prices drop and now Billy's 200k house is only worth 150k. Let's say Billy gets repossessed because he couldn't keep up his mortgage payments.

    What happens from the bank's point of view? They get £150k from the sale of the house and Billy's still on the hook for the difference; 180-150=30k. So the bank continues to chase Billy for the remaining amount. However, it's a lot easier to service a debt of £30k than it is the original mortgage of £180k. Plus Billy will be forced to move into a cheaper house with lower rent payments than his huge mortgage was, so he can use the savings on the rent to help him pay back the remaining £30k.

    So actually the bank doesn't really lose in this situation. Provided they can force Billy to keep paying the remaining amount, after a number of years he'll have cleared the remaining debt and can start saving cash for another house. A house that will be cheaper than his original £200k one.

    So from the bank's point of view, the only risk is converting a £180k secured loan into a £30k unsecured one. Provided Billy can't weasel out with some kind of bankruptcy clause, the bank loses nothing.

    Therefore it begs the question of whether a better government policy would be to punish those who overborrowed by removing their ability to escape the result of their actions? It would also introduce a much-needed element of risk in paying too much for a house. If you bid too much and you lose the house, you'd be paying for the losses for years afterwards, with no possibility of escape.

    Would it be a vote-winner? No more cash for the banks and punishing those who caused the problem in the first place by bidding house prices too high. Depends on the numbers really. But it's worth considering at least. Doubtless you'd lose Billy's vote, but you'd get the votes of all those pensioners seeing their pensions destroyed by quantitive easing, plus all the savers would be happy because you could put the interest rate back to where it should be to encourage saving.

  2. Looks like someone gets it:


    19 July 2012 9:34AM

    1) Massive taxes on BTL scumbags' unearned income for buying up all the first-time-buyer houses.

    2) Tax relief for renters.

    3) Land Value Tax on land banks to free up land for building.

    4) License landlords and put them all on a register - stirke off any of them who default on minumum standards.

    5) End the scam of non-refundable deposits by scumbag letting agencies. Cap credit checks at GBP10.

    6) Landlords must provide a free credit report of their solvency to prospective tenants.

    7) Prevent eviction of tenants from their home if landlord defaults on his/her mortgage.

    8) Sack Schapps, he's a useless apologist for the non-productive rentier parasite class

    HPCer maybe? I like number 6. Hadn't thought of that one, but it makes lots of sense that prospective tenants should have a right to know if their landlord is a whisker away from being repossessed.

  3. <snippety snip>

    No, you have always misunderstood this bit Eric. Encouragement to lie was at the level of the mortgage arranger.

    <snip snip snip HA HA HA!! snip snip snippety snip>

    Which kind of begs the question as to why no mortgage arrangers have been prosecuted for mortgage fraud? At the very least they should have some kind of fine or official sanction. Are they part of some kind of professional scheme where they can be struck off? If not, why not? A mortgage is the biggest financial commitment most of us will ever make, so surely it should be regulated nine ways to hell.

  4. The most worrying thing is that there doesn't seem to have been any action to prevent such a thing ever occuring again:

    1) Legislation against risky lending (via mandatory loan-to-value and loan-to-income caps)? Nope

    2) Isolate casino banking from retail banking? Nope - still just talking about it

    3) Any bankers or mortgage advisors being jailed for mortgage fraud via LIAR LOANS? Nope

    4) Splitting banks into smaller pieces? Nope (but that might change with Lloyds having to sell off a lot of branches)

    5) Issuing any new banking licenses so that new players can enter the market? Nope

    6) Making rating agencies legally liable for giving ratings based on inadequate investigation of the thing they're actually recommending? Nope

    7) Including house prices in inflation figures and forcing the Bank of England to use them when setting the interest rate? Nope

    You'd think that 5 years after the crash they'd at least have SOMETHING in place to prevent it happening again. Nothing springs to mind, though. Which is damning in itself that they've done nothing worthy of remembering to fix things. So far the strategy seems to have been to throw more and more cash at the banks and try to devalue the pound via quantitive easing whilst almost completely ignoring the causes of the problem in the first place.

  5. Yes but you forget the main problem at the end of the day - price of travel which will skyrocket in the greedy UK because the stupid government allows the rail companies to use their monopoly and gouge consumers.


    train (East Coast rail) from Newark - £75 each way. Time spent 1.15h

    train (London Underground) from Epping - £4.80 each way. Time spent 1.15h

    Ahh yes. Good point. It would work if that £71 price difference was made up for by the reduced rent/mortgage payments as a result of moving out of London and living in Newark. Being unfamiliar with that area myself, I don't know if that's true or not. I suspect not.

    You have to wonder though if it really does cost that much to provide that train service along the London/Newark line. Somehow I get the unpleasent feeling that it doesn't cost anywhere near that much and it's simply subsidising the less profitable routes on the train company's network and providing lots of profit for the train company.

    If the tickets are cheap enough however, everyone wins: companies in London get increased access to cheaper labour and people living outside of London get access to the job vacancies of London. All of which economic activity the government gets a cut of via taxes.

  6. So the original question of this thread amounted to "what happens when robots get cleverer than humans"? This has been causing angst amongst those group of people whose job it is to predict future trends. Indeed it's got a special term: the singularity.

    It's called that because we can't predict with any certainty what will happen when minds far greater than our own are in control. In future-predicting terms it's pretty much the same as a map that says "here be dragons". Basically it's just a cop-out to say "I don't know".

    On a lesser scale regarding increasingly sophisticated automation, the great economist Adam Smith's invisible hand theory basically says that lots of individuals working separately for their own selfish ends somehow ends up benefitting society as a whole. Thus a highly automated factory producing thingammybobs at very low cost produces profits for its owner but also serves a useful purpose to society.

    Once it's possible to produce a certain sort of manufactured item at very low cost, the owner could try to restrict production to maintain his profits, but what's to stop a competitor setting up and pricing his products cheaper than yours? Economic theory says that in a real captalist economy prices tend to find the right levels on their own, which in this case would be downwards to reflect the cheaper cost of production.

    Although writing this, I can't help but notice just how much this doesn't apply to house prices in the current fixed market. Sure, demand has dropped thanks to sense returning to the mortgage market, but prices haven't dropped much to reflect this new reality...

  7. The main issue is the price of the tickets. They really need to come down. The silly part is that season tickets for some routes are 1/2 the price of a ticket if you just turn up on the day. Needless to say, regular commuters all own season tickets. But if you just want to use the train a few days per week, it's actually more expensive than buying a season ticket.

    Other important concerns are punctuality and reliability. I don't really care if the journey takes 10% longer so long as I can rely on it to get to my destination on time. I have a sneaking suspicion that the Germans get their trains running on time by allowing extra time for a train to get to the next stop, so if the train could do it in 10 minutes they timetable it for 13 minutes. Then if the train arrives a bit late at one stop, it can catch up a fair bit by the next stop and eventually it's running on time again. I haven't noticed British trains being able to do the same thing on a consistent basis.

    Finally having enough carriages on the train so that you're not all packed in like sardines every single day.

    Regarding house prices in the south east, if you had decent high speed trains that went regularly to the south east and the tickets didn't cost much, then not so many people would have to live there. Wouldn't it be nice to live somewhere where your house is twice the size, half the price and your commute time stays almost the same? That's what cheap high speed rail promises.

  8. Glad I'm not the only one who thought "what the hell?!?" when I they read this.

    So costs have gone up and your income is the same, yet magically everyone suddenly has more cash to spend because prices have stopped rising? How's that one work then?

    Sometimes I wonder if these people actually got any kind of grade at all on their school maths exams. Maybe their test paper went like this:

    Question 1 (worth 50% of your overall mark): What is your name?

    Question 2 (worth 25% of your overall mark): Throw a pen at your mate. Did you hit him?

    Question 3 (worth 25% of your total mark): The below diagram shows 17 tiles. How many are coloured red? (Diagram shows all tiles but one coloured red)

    I actually did see #3 in a real school text book. I couldn't believe it when I saw it - this was for children aged around 12 at the time. It beggared belief. I could imagine someone counting all those tiles to get the answer.

  9. <sarcasm mode on>Well if you're looking for a profession that's always going to be there, you could always train your daughters to work in the sex industry. Not sure anyone really wants that for their children, though ;) <sarcasm mode off>

    I'd say:

    1) The ability to cook, and to know nutrition requirements e.g. daily calorie counts, which vitamins do what. So you're not reliant on pre-packed junk food that messes you up and makes you fat

    2) Financial literacy. Compound interest, opportunity cost etc. To stop you being conned by all the sociopaths that seem to inhabit the financial industry.

    3) Learn how to learn. Your memory and your brain works a certain way. Learn what's the best way to remember things (hint: overnight "cramming" sessions aren't the best way to do it)

    4) The ability to analyse why someone's giving you the advice they are (hint: it's always going to be at least in part to benefit themselves, probably at your expense)

  10. Correct me if I'm completely wrong here, but isn't one of the essential elements of capitalism - indeed the foundation of the whole idea - that new companies can enter a market to attempt to provide better/cheaper goods/services than the existing ones?

    Sure you don't want to give out banking licenses to just anyone, but it should be possible for serious people with reasonable start-up funding to open new banks and attempt to take some business off the incumbents.

    The alternative is not capitalism - it's having a bunch of banks where no new players can enter and the current banks can't ever fail because they're propped up by the government. Sounds a lot like communism to me...

  11. Works OK in London, where bankster pads nestle up against council estates, and when you want a supply of slaves to serve your latte with gingerbread syrup they won't have far to commute.

    Are you suggesting Cardiff adopt the Paris model where all the riff raff are parcelled off to huge estates on the periphery?

    Didn't know that about London. Like most people who live outside the M25 ring, I try to avoid it as much as possible ;-)

    Mostly I was wondering out loud whether mixing all sorts of people of different incomes together in one housing estate makes for a happy community or not. On the one hand, you regularly see each other and hopefully talk a bit so you understand what these people are really like, rather whan what you think they might be like. On the other hand, maybe it breeds resentment and causes problems. It's interesting to note that given a choice it seems people from similar social groups tend to live in the same areas. Take ethnic groups for instance - there's parts of Birmingham like Alum Rock (can't spell it) that seem almost entirely comprised of people from the Indian subcontinent.

    Maybe people feel happier living next to other people like themselves? Maybe not...

    There's no clear answer really. I wonder if anyone's actually done any research to prove what's best one way or the other?

    One thing's for sure: given two identical houses, one with poorer neighbours than the other, which one would you prefer to live in?

  12. How come the mainstream media isn't tearing the government a new one over this? It's clearly the stupidest thing ever. We got into trouble lending too much cash to a bunch of no-hopers who can't pay it back in any kind of reasonable market with functioning interest rates. So the economy's screwed. Their way to make it not screwed? More of the same!

    I appreciate the need politicians feel to be seen to be doing something, but really can't they just copy Boris Johnson and meddle in stupid things that don't actually affect the real world? The markets work best when there's some sensible rules made and enforced by the government and then they just get the hell out of the way.

  13. But it's a point worth mentioning that you can't just dump a ton of new houses on the outskirts of an existing city without adding at least some infrastructure - new schools, supermarkets, roads etc. I've noticed they tended to do this in places down in the south east. Last time I went there (around 2002), Bracknell had this - loads of houses had been thrown up, but the city centre was tiny.

    I'm also not sure it's such a great idea to mandate mixing "social housing" (a.k.a. places for the dole scoungers) in with everyone else. It wouldn't matter so much if people's incomes didn't vary so widely, but as it stands those people with the cash to do so will try to avoid mixing with "the proles" as much as possible. This means that the more expensive houses on mixed estates are a hard sell as soon as rich folks realise there's going to be a family on benefits living next door.

  14. Surely there must be some kind of bank loans to companies that don't require a personal guarantee? Okay, they're higher risk for the bank, but that just means they will charge a higher interest rate on them.

    And yes, I'd like to see a lot more of these property types going bust. We need a lot of examples of people losing everything to put the fear of god into the public about using housing as a quick and easy way to make money.

  15. Good grief, what's so hard about ensuring house price stability? It's unbelievably simple:

    1) Cap loan-to-income ration to a sensible amount (3.5x single income)

    2) Cap loan-to-value to a maximum of 90%

    3) Legislate to ban Eric Pebbles' favourite bugbear: LIAR LOANS

    It's not rocket science. It's just about sensible lending.

    How come nobody in these articles mentions these things? Probably because they're too worried about a hoard of financially illiterate morons complaining that the bank won't lend them enough cash to buy a house.

  16. I think a pertinent question to this debate is why are we even paying child benefit at all when the world's population is spiralling out of control?

    Whatever happened to individual responsibility for one's actions?

    Silly me, I thought if you were planning to have children you'd first work out if you could afford them. If you couldn't, you wouldn't have any. It's not like there's no way to prevent children appearing - it's not like we don't have contraceptives available. Heck, I'd go for cutting child benefit to zero for all children born 9 months + a bit of extra warning time to prepare people from now. Then use some of the saved cash to providing free contraceptives for anyone who wants them.

    For those who have too many children for them to afford, you'd get child services involved and take the children away from the irresponsible parents. Consequences. Of. Your. Actions.

    In other countries such as the US and Japan, unemployment benefits have a time limit. If you don't find another job before the clock runs out, you're in deep doo-doo because the government stops paying you. I think that's a really bad idea. I prefer our system because I'd rather pay someone enough cash to cover basic human needs like food and shelter. Without that, these people get desperate and a good number of them would turn to crime. Plus the US/Japanese system relies on people actually being able to find a job. If uneployment's high there probably aren't any jobs you can get.

  17. This looks like it's fitting into the timetable nicely:

    Stages of a housing price crash

    1) Initial trigger

    2) First drop in prices due to initial panic

    3) Banks realise they've loaned too much and are insolvent

    4) Banks increase the gap between saving rates and loan rates to recapitalise

    5) Government chucks cash at the banks

    6) Banks build up their reserves again

    7) Once reserves are looking better, they start to pull the plug on people in arrears in much greater numbers

    8) Higher numbers of repossessed houses and distressed sales come onto the market

    9) Prices drop

    I'd say we're just starting #7 if this article is representitive of the whole country. Will certainly be interesting to watch. I'll be cheering them on all the way. Will be nice to see all those stupid people who overborrowed get what's coming to them. The real icing on the cake would be to see a lot of bankers being thrown in jail, but that's probably asking too much.

  18. Another thing worth considering is when both incomes are required to make the mortgage payments, what happens when a couple decides to have children?

    You can't engineer away biology, which means at some point the woman is going to have to take some time off work, eventually resulting in lower income at some point. Surely this must affect the birth rate since a sizeable number of people will decide they simply can't afford to have children.

    Also isn't there some statistics somewhere that keep pointing to the continuing increase in single person households? I wonder how that affects things...

  19. I wonder what Mervyn really thinks versus what he's allowed to say in public. Surely he must realise that recovery can't occur until the underlying problems are fixed. Right now, everyone's sitting on their hands waiting for someone else to make a move. Banks don't trust each other, but they all suspect that they've loaned out too much cash against assets that aren't worth that price any more.

    One thing's for sure - once the dam breaks it's going to be interesting...

  20. MAKES MY BLOOD BOIL. :angry:

    I'd like to nominate Eric "Liar Loans" Pebble for the title of "angriest person on housepricecrash". I mean quite a few of us are disgruntled or quite annoyed, but you take it to a whole new level. Every time I see the words "liar loans" in huge capitals and in red, I chuckle to myself imagining how forcefully and angrily you'd be saying it to yourself as you typed it.

    Eric, I'd like to see you in a "no holds barred" grudge match debate with Gordo "we won't let house prices rise out of control" Brown and Mr Grant-Schapps. It would be a real piece of quality viewing. You da man!

  21. I keep trying to think of ways of making buy-to-let less attractive to investors, but the problem is the flaw always seems to be "but the landlord will simply increase the rent to pay for it".

    About the only things I can think of that might work come in making it harder/more expensive to actually become a landlord in the first place. Perhaps something like requiring a much bigger deposit to get a buy-to-let mortgage.

    Anyone else have any ideas that would tip the balance more towards owner-occupiers?

  22. "House prices moving sideways"

    Where to even begin. A price is a one-dimensional quantity. It either goes up, down or stays the same. There is no "sideways". Some people seem to think they sound clever or trendy when they say this, but in reality all they're showing is a lack of understanding of the most basic concepts of mathematics. Is 4 "sideways" of 3, or is it simply higher than it?

  23. I tend to agree with Ruffneck. If the government's dead set on a massive spending splurge using borrowed magic money, I'd rather they spend it on something real that does something useful. Simply handing it to the banksters to gamble away on stock markets and pay themselves huge bonuses isn't my idea of good value for money.

    Maybe I'm suffering from huge-numbers fatigue, but £32bn doesn't seem that much any more when you see numbers like £100bn being casually thrown around to prop up the banks.

  24. Why would good transport links with London suck the life out of a city? Surely it would mean that companies in that city could more easily trade with London. It also allows people to live in that city and work in London on London wages. Surely that's a good thing since it allows people to move out of the south-east (thereby reducing demand for housing stock) but still be able to get there quickly if necessary. Assuming (probably naively) that the ticket prices aren't absolutely ridiculous, that is.

    I reckon so long as they keep ticket prices down it would be good all around because it encourages travel in both directions. If you want to set up a company in Birmingham but need to have easy access to London expertise you can. Just put your office near the train line.

    I think it's a great way to spread out the prosperity of the south east to other parts of the country. Of course, whether it's worth the price tag and environmental impact is another matter entirely.

    There's an article here from the London School of Economics discussing the whole idea of high speed rail links that makes for interesting reading.

    Here's the last paragraph of the study:

    Taken together these findings show both that the HSR link had a sustainable, significantly positive economic effect and that the most obvious alternative explanations can be ruled out. If the relationships we have established here can be verified in further research, then the economic effects of future HSR projects all over the world can be predicted with the same methodology – not least for Britain’s next generation of rail network.
  25. It does illustrate an interesting point, though - maybe the central bank's base rate isn't really as important a factor as it was just a couple of years ago. If both the saver's and the borrower's rates don't really bear much resemblence to the base rate, then it becomes increasingly irrelevant.

    This makes one wonder what happens when many banks start competing for saver's deposits by increasing the interest they pay. It reduces the difference between interest paid to savers and interest earned from borrowers. This reduces the bank's profits which would force them to put up their lending rates if they can't risk losing saver's deposits by lowering the saver's rates.

    So long as the banks don't trust each other and assuming the central bank or governments don't interfere too much, the net effect would be the same as the central bank interest rate being raised. If interest rates go up, overstretched borrowers get repossessed, distressed sales increase, people become more wary of borrowing too much and hopefully the whole mess we're in begins to correct itself naturally.

    Of course, it's highly unlikely that the central bank or the government wouldn't want to stick their oars in and muddy the waters because they like to be seen to be "doing something", even if what they're doing actually makes no sense.

    It reminds me of a Dilbert comic where the pointy-haired boss has a project that's failing. He can't add funds or people to the project, he can't cancel, delay or ignore it so instead he asks for daily status reports until the project is back on track. I feel like that's what politicians do sometimes. Sometimes the best course of action really is to sit back and let things take their course.

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