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Mr. Gruff

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  1. Today at work we had a meeting with a credit provider. It's a little complex, but I would essentially act as an introducer, fill out the paperwork, send it to the broker, who then arrange the credit with a bank. I pay a 9.25% fee but get 0% finance for my clients for 10 months. Otherwise it is a 6% fee and interest rates of 7.9% for 2 years (this may look like a bad deal for me but it gets a lot of business through the door, plus I just put up my fees and give a "cash discount" for anyone who pays up front) Anyway, the rep from the broker was talking about how they were the best on the market because their acceptance rate has remained at approx 85%. 3 years ago the fee was 5% over 12 months. I raised this with the rep, that I now pay a higher fee for 10 months than I did previously for 12 months. The answer I got - "That's because of the whole sub prime crisis. Too many people borrowed too much and now everyone else has to pay more" The irony nearly killed me. The rep was totally oblivious that what they were marketing WAS SUB PRIME FINANCE!!
  2. Does anyone know why 10 year gilt yields are dropping? That's it.
  3. I'm gobsmacked. Got your finance for a free of charge lesbian equality centre rejected on the grounds there is no business merit? Have you been rejected for a loan based on the fact that your previous five attempts at establishing a Maserati dealership in Dundee have failed?Fear not, Captain Darling is here to save the day by forcing those nasty banks to hand over the money! Seriously, forcing banks to lend money when they have done their own analysis is not a good idea. Expect more bank failures to come. Meanwhile, I'm writing a business plan for a dry cleaning service for your paper based currency. Have your money laundered for a fraction of the cost of conventional "cleaning" processes. If my loan gets rejected, Darling will force the bank to lend it to me.
  4. I've been thinking about houses and house prices a bit recently, particularly as I keep getting told that there's never been a better time to buy, with low, fixed interest rates available and lower prices. I need to get things clear in my own head, so what better way to do it than to write a rambling narrative and post it in to the economics subforum? The way I see things, there is a balance of savings and debt, and all things being equal, the market will find the right equilibrium between the two, if left long enough and without interference, assuming, for some crazy reason, that everyone is rational. With the lending market in equilibrium, house prices would be stable relative to inflation. There are several ways the market can be upset. Government is the big one. Sentiment is the other one, and is quite often caused by the first. Government can interfere with the market by creating incentives to borrow (or for banks to lend), or to buy houses, or incentives to save or to sell houses. So, what constitutes examples of each? Well, falling interest rates would be an incentive to borrow, signalling that what you can have today will be cheaper tomorrow, and probably with some inflation destroying some of the value. That's a powerful incentive. Similarly, MIRAS was a powerful incentive as it reduced the cost of borrowing, and effectively doubled the benefit over saving. Increased competition in the mortgage market, that's a powerful incentive as it makes the margin on mortgages tighter. Stamp duty holidays, that's not an incentive at all. Does that reduce the cost of buying a house at all? No, it simply means that you'll pay less to the government when you do sell a house. Now, things that will swing the balance towards saving. Rising interest rates, will provide an incentive to save more. Tax relief on savings, will help with boosting savings rates. Decreased competition in the mortgage market. Removal of incentives to buy. OK, so now we see what will help the housing market and what won't, now let's have a look at what's happening. Since 1997, we have had: 1. Gradually declining interest rates 2. Capital reserve requirements on banks lifted 3. Increased availability of funding through subprime lenders 4. Improved rights for buy to let investors 5. Change from TESSA to ISA 6. Strong pound, imports cheap, exports expensive So, of these six changes, and I'm sure that there are others, 4 pushed the balance towards borrowing and, the fifth will slightly have improved the savings rate. The strong pound shifted the balance of imports and exports towards importing and consumption. So where are we going now? 1. Interest rates at historic low, nowhere to go but up. 2. Capital reserve requirement likely to be increased 3. Subprime collapsed, mortgage lending relatively low. 4. ISA limit raised slightly 5. Increased tax on savings(pensions), especially on high incomes. 6. Weak pound, leading to expensive imports and cheap exports. So now we are in the situation that we have suddenly found ourselves in a consumption based economy with a weak pound and expensive imports. Fortunately our exports are relatively cheap, of which we have more than a lot of people think. The low interest rates are a signal that borrowing costs are going to climb, hence the scramble for fixed rates and the rapidly rising swap rates. Capital reserve requirement increases (implementation?) will lead to a further reduction in available funding for the banks, leading to decreased competition and higher margins. The increased ISA limit will boost savings but only marginally. It seems that we have used up all our available sources of boosting the lending market. There is nowhere to go except down. House prices have further to come down, and will do until the equilibrium in the market is restored, or the incentives are changed again. Still, could be worse, I could live in Sweden. EDIT: Comments welcome, this wasn't really meant to be a discussion, more a way of clearing my own thoughts.
  5. I have approx 1500 quid on CC every month, which is paid off entirely as it is due. It adds up to a couple of free flights a year with a BA Amex. Otherwise nil. Worst debt was 7k loan to buy a car after being a student. Paid off entirely a couple of months after starting to work. ETA: Also have 1250 quid overdraft, constantly used but never breached. 0% interest, and well over 1250 in savings to balance it out
  6. Not unless he started selling perfumes in a pyramid scam when he was 8. - http://en.wikipedia.org/wiki/Inside_Track#History
  7. Could be a good way to boost the deposit fund - go and live in a caravan for three months, selling thistles and stealing things from the locals.
  8. Pah! This year I was business class with my wife to Europe, next year it's LAX in First! Thanks to all those who contribute to my holidays!
  9. Brown trousers time. Let me just check a few things, so I'm getting the right picture. QE is replacing money which is disappearing thanks to the miracle of fractional reserve banking working in reverse. If they print too much, then it's inflationary, if it's right we will have stability now and inflation later, unless the same amount is also removed from the economy, or if it's not enough we will have deflation, with possibly inflation later. Interest rates down to 0.5% means that firstly there is less incentive to save, therefore banks can't lend out. Rates are dropped to encourage borrowing, but there's noone lending. So, why put the two together? My guess is that they don't have a ******ing clue what they are doing. Money is disappearing as savings are withdrawn, leading to reduced lending. Money is then pumped in by the BoE. So who is winning? My guess is that the banks are going to have to raise interest rates regardless of the BoE decision, and will have to pay more than base rate for savings. Have a look at what Northern Rock did after nationalisation to see the ideal way out. Now they're screwed because of political pressure. Sorry to ramble, I'm feeling oddly philosophical about the whole thing and I have no idea what's going to happen.
  10. Apologies if this was posted earlier, I couldn't see it... http://news.bbc.co.uk/1/hi/business/7922186.stm
  11. I can't believe you could be so insensitive. I mean, you can't go around criticising people for being... oh, you mean the ONE-EYED idiot in Downing Street. Not the two-eyed Scottish idiot with dark eyebrows. My mistake.
  12. Keep enjoying the party. Prices dropping fast, regardless of what EAs etc. say. I know a couple who were recently completely robbed by an EA. Young couple, under pressure from all around to "buy now before you miss the opportunity", "there's never been a better time to buy" etc. despite the downturn. Went to view a flat. Liked it. Next day EA called and said that they had had another 7 viewings resulting in notes of interest (Scottish system), would they like to add a note of interest? Flat has been on sale for ~6 months. Suddenly, 7 notes of interest in one evening?? It hasn't been reduced or anything like that. Anyway, they put in a note of interest. A few days later, EA calls the woman, at work, and says that they have an offer, would they like to put in a competing offer? Time is limited, you must decide in next 30 minutes (alarm bells should be ringing here). Woman asks if she could quickly call her partner. OK, EA says, but as long as she calls back in next 30 mins she'll hold. Woman calls her partner, no answer. 15 mins later, EA calls back at work again, original offer has been upped by 3% - bringing offer to 117,500. Survey says approx value 118,000. Guess what? Woman decides to take executive decision, offers 118,000, and the offer is accepted by the EA on behalf of the client immediately. Now, can anyone spot the lies being told. Firstly, flats sitting on the market for 6 months don't get 8 notes of interest in one evening's viewings. Secondly, the offer appears to have been a complete fabrication. If there was an offer already at play, then it should have gone down to a closing date. Third, the time pressure and the rising rival bid should have raised attention rather than being taken at face value. Fourth, if there was a rival bid then why did the EA automatically accept 118,000 on behalf of the client? It could all be genuine. I think not though... So, Sparker, hope the misfortune of others puts your plight into perspective.
  13. He is, he never really got into boosting house prices, so kudos to him for that. My problem with him is that he is a sycophant, grovelling to those who have money and can spend with total disregard to the final product, and being overly critical of those who simply can't afford to do what would be the ideal. Sometimes compromises are necessary due to budget, most people WILL do the best that they can realistically afford to and he was pushing them to do things that they couldn't afford.
  14. Self-selection. Why do Costa charge an extra 2 quid for a large cappuccino with syrup when the additional cost is about 15p? If you WANT to pay for something that costs nothing and adds virtually no value, do you think the car makers will stop you?
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