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DrBob

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Everything posted by DrBob

  1. Looks like we had our Eureka moments at the same time
  2. I had my EUREKA moment today. You know the HPC is here when: 1. Real house prices are falling with Nationwide's seasonally-adjusted MoM HPI at 0.1% (annualised = 1.2%, compared with CPI 2.4%, wage inflation 3.3%, RPI 4.4%) 2. Interest rates are on their way up (inflation is above target, input prices are rising like crazy, and as soon as IRs go on hold the pound will tank driving inflation higher) 3. Mortgage lending is tightening (and credit spreads are widening as takeover deals and bond issues collapse on all sides) 4. The media is negative day after day (after day) The sheeple will remain in denial until house prices show a few consequent national MoM nominal falls and media stories of negative equity become more widespread. Then be prepared for plenty of hopeful 'early recovery' claims.
  3. To fall by a third is quite modest. Peoples' memories are short, but insurance companies will always remember! Insurers are not obliged to offer insurance to a property with a flood risk of greater than once every 75 years. Are the insurers really going to agree that the annual flood risk for certain properties in Oxford is less than 1 in 75 when they flooded in 2000, 2003 and 2007? Any self-respecting insurer would refuse cover in these postcodes. And no insurance = no mortgage. The only possible buyers would be those with a big pile of cash and a love of sewage. It's actually very sad.
  4. How much of the slowdown in debt issuance is down to summer holidays? Will things take off again in Sept/Oct?
  5. I don't quite understand - do you mean that the BoE 'chiefs' (presumably Gieve and Merv) are pushing for a IR rise to 6%? Or do you mean that the chiefs of your bank are pushing for 6%?
  6. Quick! Let's go round and dig up Goldfinger's garden while he's away!
  7. Agreed - great post! I love the "summer sale" concept. Will they start putting a whole range of stickers on like Sainsbury's? "Great for barbecues!" "Special offer" "Half price" or "Two for one" (this one being reserved for repossessed new-builds)
  8. Subprime market faces further setbacks Published: July 22 2007 16:34 | Last updated: July 22 2007 16:34 http://www.ft.com/cms/s/58450824-3866-11dc...00779e2340.html http://www.ft.com/cms/s/58450824-3866-11dc-bca9-0000779fd2ac,dwp_uuid=d1245916-4f9c-11da-8b72-0000779e2340.html' rel="external nofollow">The stricken US subprime mortgage market is likely to suffer further setbacks in the coming months as $500bn of risky home loans sold with initial low “teaser” interest rates are reset at much higher levels, analysts warn. “ It’s like an onion, as you peel back another layer it just smells worse, ” said William Strazzullo, chief market strategist at BellCurve Trading. Over the next 18 months, adjustable-rate home loans sold at the peak of the high-risk lending boom in 2005 and 2006 will be reset. Given a recent tightening of lending standards as banks try to rein in their mortgage exposures, this raises the prospect of further serious losses. Christopher Flanagan, strategist at JPMorgan, estimates up to 45 per cent of borrowers facing resets will not meet criteria to refinance into new home loans . The mounting problems could force ratings agencies to downgrade billions of dollars of mortgage securities below investment grade, a move that would in turn force many investors to sell their holdings and exacerbate the spiral of losses. “There is a possibility that one or two money centre banks and dealers could be a casualty along with hedge funds and institutional investors,” said Mr Lo. Even higher-rated securities were unlikely to be immune from losses, Mr Flanagan said. “Losses are going to move up the capital structure to the higher-rated pieces. Hedge funds will continue to feel the pain,” he said. I wonder how common remortgage difficulties will be in the UK? I imagine borrowers on cheap 2-year fixes will just assume they can move to another cheap deal when it comes to an end. But if credit lending has tightened, they might be forced to stay on their original lenders' punitive SVRs. Nasty!
  9. Quite right, and well put! I doubt this will apply to home owners, though. They form the voting majority, so the government will bend over backwards to help them. :angry:
  10. I like it! But my guess would be more like this: Note the 'bull traps' in late 2008 ("it was just a temporary credit crunch") and again in 2011 (in the run up to the London olympics). I also doubt that the base will be as low.
  11. There was a feature on this morning's Today programme about private landlords letting out houses to immigrants with four people per room. One Eastern European couple were paying £60 per week each to stay in one of these houses. When they had a baby they were charged another £60 per week as it counted as a third person! :angry: Councils really need to crack down on this.
  12. The FT article on Basis Capital is quite bearish: Basis Capital in creditor crisis talks http://www.ft.com/cms/s/8a8117b6-3563-11dc...00779fd2ac.html http://www.ft.com/cms/s/8a8117b6-3563-11dc-bb16-0000779fd2ac.html' rel="external nofollow">Last updated: July 18 2007 21:20 Basis Capital, one of Australia’s biggest hedge fund managers, is in crisis talks with creditors after banks seized and began to sell some of its investments linked to hard-hit US subprime mortgages. Creditors said Basis missed margin calls – demands for additional loan collateral – on Monday for its Basis Yield Fund, and has appointed accountants Grant Thornton as restructuring advisors. Lehman Brothers and Merrill Lynch are prime brokers to the funds. All declined to comment or did not return calls. Grant Thornton also declined to comment, and Basis did not return calls. Basis removed information about its funds from its web site this week, along with glowing reviews by rating agencies which had helped it sell to private investors in Australia. Other hedge funds investing in structured credit are likely to have similar issues as values are marked down savagely by brokers, hedge fund investors and creditors said.
  13. I've been reading this thread with interest. I'm off to NZ in December for 3 years (I'll be working there, GF is a Kiwi). There's the possibility of staying there long-term if the job prospects are good. House prices are more unaffordable than even the UK, and the currency is very strong. I'm resigned to the fact that I won't be buying property there for the next few years, but it does raise the question mark over where to put my house deposit savings. What do you think? GBP or NZD? Both look like they're cruising for a fall! If the NZD is going to link up with another currency, the Australian dollar is the natural counterpart. IIRC this has been discussed seriously in the past, and Australia is the closest trading partner. Seems that most NZ firms are owned by Australian corporations anyway!
  14. Now this is interesting - the whole CDO theory relies on putting all the risk into the lower-rated tranches (the BBB and A grades). I don't understand how a CDO can 'cross-invest' into another, but perhaps this explains why even the AAA debt is being traded at below book value.
  15. I don't think that Merlin Entertainments are necessarily calling the top of the market. Isn't the whole 'sell and lease-back' scheme done for cashflow and tax avoidance purposes?
  16. Well I'm hoping for a rate rise ASAP. I'm a 'saver', and am planning to emigrate in December, so anything to help my interest earnings and keep my sterling savings strong is a bonus. On the day the rates went up to 5.75% my girlfriend & I went out for a celebratory meal - we plan to do that for each rise!
  17. ... and a chinese shirt dressing!
  18. Agreed - property is a great investment if it rises. No other consumer investment can offer such massive leverage. The ugly part only comes if it falls in value. Nominal falls will occur in many regions in this house price crash (if anything just because this time round the MPC are charged with keeping inflation low), and negative equity will rear its head. The ones who get caught out will be those who are forced to sell (through unemployment, unaffordability etc).
  19. It's all in the choice of words. People spend hours carefully crafting these press releases: - a crunch in Britain’s property market next year - painful increase in mortgage repayments. - worst year since 1995 - a real-terms cut in the value of most people’s homes It sounds like they're rather concerned to me. I don't even know whether the "little sign that a sharp housing downturn is on the cards" comment was part of the original press release. The biggest drawback with this article is that it was probably designed soley to persuade the MPC to keep interest rates on hold a bit longer. :angry:
  20. Agreed. Proper rights for tenants are a huge one! The Assured Shorthold Tenancy is a national disgrace, and the refusal of successive governments to give proper rights to tenants runs counter to everything they preach about protecting the family & providing workforce flexibility etc. About the best thing Brown could do now would be to reform/revoke the AST and protect tenants against eviction and unreasonable rate rises. It would fit with all his pledges on housing etc.
  21. Lenders predict UK property crunch as rates take effect http://business.timesonline.co.uk/tol/busi...icle2087112.ece http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article2087112.ece' rel="external nofollow">July 17, 2007 Higher interest rates are set to provoke a crunch in Britain’s property market next year with the weakest growth in prices for 13 years , the Council of Mortgage Lenders (CML) said yesterday. Michael Coogan, director-general of the CML, said that house prices would grow at half their current rate by the end of the year and would rise by only 2 to 3 per cent in 2008. The slowdown predicted by the CML would give the property market its worst year since 1995 and would probably mean a real-terms cut in the value of most people’s homes. Mr Coogan said: “I don’t believe there will be a crash, but clearly a slowdown is more likely in an environment of higher interest rates.” Look at the use of the word "crunch" instead of "crash" - even the VIs are panicking! Hopefully the BoE will stick to their inflation target and keep tightening the screw...
  22. Hang on! I agree that the BBB grades are a wipe-out, and the lower A-grades will also see falls, but look at the scale of the AAA graph. A fall from 100% to 97.75% sounds pretty modest for me, and certainly doesn't indicate an imminent default. The precipitous nature of the graph is also what you typically see when relatively illiquid assets are traded - have a look at the graph of a small AIM-listed share and you'll see that sort of pattern. I don't know the maths of these things, but isn't the idea of CDOs that the lower grades carry all the risk and the higher ones are safe as safer than houses? The AAA CDOs should hold their value in the same way as a normal bonds - that is, their value (and yield) will vary depending on prevailing interest rates. The BBB and low A-grade ones are going to see the carnage.
  23. I don't think this article is particularly hysterical, and I for one don't subscribe to the apocalypse scenarios sometimes outlined on this site. What I do think is that the oil price will remain high and provide a continuous upward pressure on inflation. This will prevent reductions in interest rates, even when the economy stumbles. The rates we have now are not high. In fact, history may show that the low rates of the late nineties, early noughties were an anachronism. And bear this in mind: the $80 oil price we have now is in the absence of any major supply disruption. There's no out-and-out war (simmering civil war in Iraq not withstanding), there's no Iranian blockade of the Strait of Hormuz, there's no hurricane or cyclone threatening an oil region, there's no fundamentalist uprising in Saudi Arabia. High oil prices are here to stay. Inflation is starting to follow. The BoE won't be able to cut rates to prevent/ameliorate the house price crash.
  24. 18 months is a long time, but my prediction for rates would be at 6 to 7%. Reasoning: rates will have to rise further to keep inflation under control in the face of rising commodity prices, but an economic slowdown will limit this. You're already doing the best thing - overpay as much as you can now so that when you come to remortgage: 1. You will be seeking a lower LTV, so you'll be eligible for better mortgage deals 2. You will pay less in interest in the long run 3. You get into the habit of paying more into your mortgage, so will have less of a 'lifestyle shock' if you have to remortgage at a higher rate
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