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House Price Crash Forum


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Everything posted by Optobear

  1. Interesting that the monthly mortgage approvals are a bit less than the annual predicted repossessions from the CML linked from the front page. At this rate of there will be one repossession for every 10 or so mortgages granted... doesn't sound too healthy for house prices.
  2. Strong!!!! I've got a credit card statement here with 1.09 as the exchange rate with the euro, that isn't strong, that is Lira territory! As to raising rates, doesn't matter in the slightest what the BoE say, it is down to the FED and ECB. When they start to make proper raises (ie back towards 5%+ then the BoE will follow. Optobear
  3. He has little choice in the matter of rates. The UK just has to follow the FED and the ECB. They can plan what they like, but when the others move, then so will the BoE. The converse is true, they won't move significantly until the FED and ECB move.
  4. We may have reached a point where individuals can't (or won't) take on more debt. Fortunately we have a government and they will have to shoulder the whole burden of creating enough debt to keep the paper money system alive.
  5. RB, that is not very bearish, or are you turning into RealistBull? Merv should stop interfering with the banking system by not lending money at effectively zero interest to banks. Stop interfering, let the markets decide rates (and the future of banks and saver) and it will work out better for all. The thing that will hike IR will be a shift by the FEB and ECB. The idea that the MPC can set interest rates independent of the actions of the US and Europe is daft.
  6. Or buy at £150k then see rates rise to 8%??
  7. Bloo, I think it goes further. Many people in society - pensioners, rich people, etc. want to have assets so they can be rich. The money they hold has to be someone else's debt. For a decade the mortgage bubble created lots of debt, and lots of wealth (positive savings balances for the rich). Recently that has stopped, people simply aren't willing to borrow enough moeny to create sufficent positive balances for those becoming richer. The government steps in and runs a deficit budget - creates gitls. They are borrowing on our behalf. Very telling last week, chap from OECD talking about Japan on Today programme, said that Japan has lots of wealthy savers, and lots of government debt. Went on to say that given the money needs to be spent in Yen, then only Japanese savers can lend the money. Rather proves my point. The purpose of government is to run a deficit budget to create debt (on our collective behalf)so that we can hold it as individual wealth. Of course it nets off to zero, but that doesn't matter so long as people want crisp £10 notes, or gilts, or premium bonds, etc. The government have to pretend they can't just create the money, that the QE is temporary, that cuts are more important than jobs, anything to maintain the illusion that they aren't just printing the stuff. Why do they get away with this appalling con? Simply because we (savers) have a demand for government and the government respond by expanding.
  8. This is small in the scheme of things, but sends a clear message about govt support for house prices. Question is who pays (even in this tiny scheme). FTB puts up 5% Govt puts up 10% Builder puts up 10% (but they can just increase the price that the buyer pays so it costs them nothing) 100% of the purchase price goes to the builder. Just a scheme to pass money to builders. Doesn't cost the builder anything because there is no "market" price for the homes - it is what they would have charged + 10%. It seems to me that we are in a phony war on the economy. The BoE pretend they control interest rates - but in reality we can only mirror the FED and ECB. At the moment inflation is raging, and they can't raise rates without FED and ECB do so too, and they're not in the same situation. When the FED and ECB do raise then the UK will raise pushing us back into recession and toppling our house prices.
  9. They are just printing, that is what a liquidity injection means.
  10. Prevailing winds are out to sea, the vast majority of the Japanese people live more than 50 miles from the reactors... this is a long term cancer risk not a large scale killer before the summer. I don't think Brits would be so calm and stoical in the face of similar adversity. I am surprised at how easily situations in the UK could lead to major disruption. The fuel protests in 2000 showed how quickly the country can come to a stand still.
  11. Power loss in Japan is going to be a serious factor too. My experience of Japan is that in the winter there is a lot of use of gas for heating (it is very cold there), but in summer the energy use domestically switches to electricity for air-con. So I'd guess that shortages of power will only get worse when the weather improves...
  12. How much pay would you want to go there and install cranes? Also, cracking through the roof might not be trivial, aren't they designed to resist aircraft crashing into the reactor (or is there an additional lower down layer of armoured roof?)
  13. Quite the opposite. Rents are high because of housing benefit. Cut housing benefit to £100 per month and watch the rents plunge. Will the landlords have the property sit empty?
  14. It reads "An NRC analysis of the potential failure of the Mark I under accident conditions concluded in a 1985 report that Mark I failure within the first few hours following core melt would appear rather likely." Jeez, this says there are 192 of such reactors worldwide... It also says "Hirokawa said measurements taken near the high school at Futaba were higher than when he had taken measurements approximately 200 meters from unit 4 at Chernobyl shortly after that explosion. He added: "At the front of the Futaba Town Hall, all our three radiation monitors went off scale and became inoperable (we could not take measurements). At the entrance of the hospital, stretchers were turned over, many things were scattered, a feeling that evacuation had been undertaken in a very rushed way."
  15. All the details are here: http://www.nrc.gov/reading-rm/basic-ref/teachers/03.pdf staggering diagrams - engineering drawings from before the use of computers - all explained.
  16. I understood lots of it was Carry trade. IE borrow Yen from Japanese depositors at low rates, exchange for sterling or dollars, take to UK or US, lend to mortgages. If the Japanese depositors want to take out their cash, then the loans in the west need to be repaid, the dollars and sterling converted back to Yen, and then they can take out their deposits in Tokyo. Or am I being a bit simplistic?
  17. It is odd isn't it, must be last resort. We're used to water being pretty innocuous stuff (we evolved that way), but it is a very agressive chemical especially at high temperature. So for example, if you heat silicon wafers in oxygen it forms an oxide layer, but only slowly, if you add some steam then the rate of oxide growth is considerably increased... So hot water is pretty agressive, and hot water with salt added sounds very nasty in a system made of steel.
  18. The repatriation could be huge. Presumably a lot of Japanese insurance companies have investments in the West. There seem to be two interest rates at the moment for government - the first is the coupon yield on recent bonds (is that the right term? I mean the rate quoted per annum for the gilt issue to get it away successfully - around 4%), and the base rate (the rate that allows the government to pass money to the banks without the sheeple realising =0.5%). The real rate that the UK needs to pay is already at 4%, so if money starts to leave the UK the government will find itself paying 5% or more, and that will become the real interest rate on mortgages too. You make a good point about the bridge to nowhere, the Japanese government have been trying to reinflate for a decade or more, but with no impact, this event will allow them to borrow to spend on reconstruction, and that will mean a fully employed Japanese work force for 5 years or more...
  19. I know there are separate threads on all these (although some have degenerated into WW2 history), seems useful to try to pick out the likely economic impacts. I know it seems rather callous to look at the economic impact of a major humanitarian disaster, but things are going to be different. The key question is what happens now economically ? My thoughts... 1) Japanese government now have to spend vast amounts of money on recovery 2) Expenditure acts to jump start Japanese economy, 3) Extra expenditure has major benefits elsewhere (esp. German engineering companies) 4) Lots of Yen gets repatriated as Japanese savers have to spend to recover - 5) Yen carry trade unwinds so much less money available in West for mortgages. 6) Increased distrust of nuclear driving demand for coal and oil 7) Major pick-up in demand for steel and other building staples 8) Oil prices further icnrease from middle-east unrest. 9) Some insurance companies in major trouble (particularly marine) 10) Shortages of some key components that are made in Japan - bits of specialist electronics, etc. 11) China, Taiwan and Korea get major boost as Japanese competition reduces in sectors where Japanese capacity damaged. 12) Yen falls, Euro rises, dollar rises, sterling rises (oil currency effect) 13) Saudi unrest appears to being contained, not clear how sustainable though. 14) Other middle eastern countries see unrest and that reduces oil output 15) BRICS countries do well out of increased demand for raw materials and oil. 16) Shipping volumes pick-up considerably. 17) Automotive in Japan picks-up, but also Japanese exports drop Looking at that overall, it seems that this will see rises in most stock-markets, will see increases in fuel prices, from a UK perspective, sterling will appreciate (helping to reduce inflation), funding available for mortgages will drop further. Key question is around interest rates, and I think UK rates are actually just a mirror of US and European rates, and so the carry of funds back to Japan will mean that Europe and and US will mean they will need to raise their rates, and we'll follow suit. Okay, lots of thoughts and speculation there, what do you all think? Optobear
  20. Good point. I for one don't see any stigma in renting - and having someone else to sort out the leaking gutters rather than my having to climb a ladder is great! As to a new orthodoxy - I think that can come - lots of very "nice" by modern taste houses become very unfashionable in the 1920s and 1930s (see large parts of South London for example). Ditto in the 1970s. We've seen a great growth in home ownership that coincided with a fundamental lack of understanding by the banking regulators and politicians regarding the creation of money via securitisation of mortgages. My feeling is that we've seen a once in a lifetime scale housing bubble. Sadly people are prone to cargo-cult behaviours - and wish for a return of the supposed good times... they often don't recur!
  21. Simplifying doesn't help unless you're clear in what you mean. When you say mortgage payment - do you mean the interest part of the mortgage payment or the capital part of the mortgage payment, or are you confusing the two? To refute your second point. I sold a house at the end of last year and am receiving about 2%pa on average on the capital after tax. If I were still owning I'd have suffered a loss due to the fall in house price of approx 2% of taht amount over the last two months. So I'm better off than if I owned? The way in which property made a massive advantage over certain periods relates to the massive leverage in buying a house relative to the size of deposit. If you'd taken a massively leveraged loan and invested in the stock market you'd have made a much bigger gain. Similarly if you'd bought a house outright (ie without a mortgage) then the returns don't look particularly special compared to say gold, or the stock market. Just compare the average house price graph over 40 years to the Dow or FTSE over the same period.
  22. Still missing the point. All the repayments beyond simply the rent are an investment choice. The issue is what to do with the repayment part - put it into the house or put it into something else. That they may have sufficient spare cash over time to make additional investments is irrelevent to their home purchase vs rent decision. As to the merits of the housing market vs the stock market, well I'm not advocating just stockmarkets - indeed I'd suggest a balanced portfolio. Also, while the stock-market can fluctuate and drop it is also much more liquid than housing. Just ask anyone who has been trying to sell over the last three years. True, but many don't. I speak from experience in terms of hiring people, and it isn't fair on my part to only blame housing. Our screwy school system whereby quality of education is mostly determined by house prices in catchment areas doesn't help either. But your point about renting is telling. Outside of London, and outside of areas with Universities or teaching hospitals the yields on rental properties are very poor, especially on larger homes. Small starter size housing tends to be equivalent in terms of rent vs mortgage, but once you're looking at 4 beds you'll probably find renting cheaper - for just the reason you've given - that people don't have to sell to get a job elsewhere. Not sure what you're saying? Are you saying that intelligent people can buy houses without taking very leveraged positions? Not my experience. Homeownership looks like a pretty big factor. In Germany you get rich and respect from doing something like designing BMW car engines, in the UK people have got rich by following Kirstie Allsop's recommendations. I won't disagree that those who made the purchase decision have done well. I've done well too by buying at the lowpoint in 1997. Question is what is likely to work going forward/ Are you really thinking that housing can rise to still higher multiples of salary going forward? Doesn't seem likely. I'm not saying that it is always wrong to buy - just that buying at historically high multiples in the UK when all other countries worldwide that had housing bubbles have seen major falls seems a bit silly. Also, do you have relatives who rented and put an equivalent amount into the stock-market on a monthly basis as those who paid off their mortgages? I'd suspect not. The mortgage model with (almost) compulsary capital repayment encourages a level of saving that few will match without the discipline of the mortgage scheme. Again, I'll make the point that the stock-market did as well as housing. You're right that the UK is culturally obsessed with housing - and politically obsessed (and hence the stupid tax treatment). But the other factor that has driven those high home ownership rates has been the availability of loans for all. That was created by the monster of Mortgage securitisation - I don't see that coming back any time soon!
  23. I am one of those who see the attraction of paying private landlords to rent as more desirable than having 70% of the population having mortgages. Firstly, you're confusing the issue - paying rent to a private landlord is equivalent to the the home owners paying the interest payment on their mortgages. The capital repayment part of the mortgage each month is an investment choice and needs to be compared to other alternative investments (eg index tracking ISA). The long run (30-40 years) shows that someone choosing to only pay the interest payment and investing their capital repayment into the stock market would do better than someone repaying capital. Secondly, owning a home is enormously inflexible for the UK economy - if you try to recruit high skill staff in the UK (outside of London) you'll largely find it impossible if the person is over the age of about 35 because they'll likely have a mortgage on a home and can't sell, or even if they can sell, then b the transaction costs of selling and rebuying are so high. This UK obsession with home ownership really damages the UK economy. Thirdly, the people buying houses are taking massively leveraged risks without really understanding what they are doing. Would they borrow 4-6 times their salary to invest in the stock-market despite it having better long term returns? Of course not. So why should they with housing? Fourthly, the ridiculous UK obsession with housing is to the detriment of other (properly productive) areas of the economy. At the moment you'd have to award the points decision to the German economic model over the UK model. A mortgage is renting the money from the bank vs renting the property directly. Buying a house with a mortgage means you make a leveraged bet on the UK housing market, renting a house allows you to make a bet on other assets - or more sensibly, allows you to make a diversified set of investments. The one exception to all my points above relates to tax treatment. The person who pays off their capital eventually gets to live rent free. The person who chose to rent and invest ends up paying tax on their income from their investment. That seems the sole reason to make home ownership preferable to renting in the UK. I'd be interested to know how Germany taxes imputed rental income (probably don't because it is hard to calculate) and how it deals with capital gains on your first home? Optobear
  24. I noticed it was particularly busy yesteday evening too. I wondered if it was Christians going out for a final blow-out before lent? I guess most people eat pancakes on shrove tuesday, so the last change for a curry / chinese buffet blow-out would be the monday evening...
  25. Sorry, not how it works. You are a not a wealthy landlord and so are not entitled to the cash. Do you honestly think that anyone other than a landlord should get £140 / month.
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