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Interest Rate Debate On Radio 4 Now

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Rolling out the Supply and Demand BS.

This article really was the same old shizzle although MLewis did start pricking with a few points. There however was no consensus of opinion between the "experts" which illustrates the fact that no one knows what is going to happen., We are going to hear more and more of this as the year goes on, but those of us who live in the real world and rely on the MK1 eyeball and lug hole can see it happening and developing around us. How many of us have friends that are debt stressed ? quite a lot if the figure of 2million mortgagees that can only just cope now (with record cheap debt) is to be believed. The Bankerticians of all parties have run around over the last few years sticking their fingers in the crumbling dyke but as the little boy found out :- when it starts going it goes quick !

PS If the banks are independant then why did they heed the chancellor Mr Brooon's call to take more risk ? :blink:

PPS. Has anyone got a link to the bbc article on the baby boomer author interview this week, I think the book is called; Baby Boomers, how we stole our childrens future ! :o

Edited by mrmagooisagovteconomist

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Rolling out the Supply and Demand BS.

Something tells me that if rates go up even a small amount the supply and demand argument will come into its own...

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Rolling out the Supply and Demand BS.

Supply and Demand isnt BS. It is the real deal.

Discerning what Supply and Demand is though, is the tricky bit.

Supply is a lot less than we all want, mainly because banks are not repossessing people as much as they could, and we also have the wonder of SMI, where we all get to pay for someone to live in a house that they cannot afford. Then there are super cheap interest rates, that allow many to live in their homes obtained with liar loans that they couldnt really afford in a normal money environment.

Add in a dollop of net immigration, and we dont have much in the way of a house price crash to speak of.

The only plusses are that banks have tightened up their lending criteria, just a bit, and there is evidence that people are being more careful with their money. Those in the public sector, in particular, are worried about losing their jobs. We have a bit of downward pressure too from BTL'ers, who are faced with shrinking rents to the HB claimants. That is minimal though, as I see that rents are supposedly going up. More like the reported rents on which HB is going to be awarded on against the 30th percentile are going up, a clear indication of the system being gamed in advance of the change coming in.

Our biggest hope has to be a lurch upwards in interest rates. There has been some action there in recent weeks in the bond markets, but not enough to bring this house of cards down.

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Rolling out the Supply and Demand BS.

Supply and demand is true. It's just not the supply and demand of houses as most people think. It is instead the supply and demand of cheap credit.

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From what I recall of how my old economics text book explained things, for most 'goods' there is an inverse relationship between quantity demanded and price. In short, there are people who would like to buy a house, but (like myself) are not even considering making a 'purchase' at current prices.

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Our biggest hope has to be a lurch upwards in interest rates. There has been some action there in recent weeks in the bond markets, but not enough to bring this house of cards down.

I would have thought that the following might bring down the house of cards:-

European debt markets 'face second credit crisis'

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8234231/European-debt-markets-face-second-credit-crisis.html

But I only have a layman's understanding of economics.

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I would have thought that the following might bring down the house of cards:-

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8234231/European-debt-markets-face-second-credit-crisis.html

But I only have a layman's understanding of economics.

Giordano,

that is pretty much the same thing.

Interest rates are determined in the bond markets. Assuming you know what a bond is, the price of the bond rises as inflation expectations fall, and as the creditworthyness of the borrow is perceived to rise. The prices also rise as players in the market change their preferences from spending now to spending in the future, and the best way to carry your wealth through to the future is with a bond from a credit worthy borrower, just so long as everyone continues to view things the same way.

And as bond prices rise, the yields on the bonds fall as the coupon or payout, is fixed.

And when, for whatever reason, players change their preference and no longer wish to buy bonds with their cash, then prices fall, particularly if there are many people seeking to borrow money via issuing bonds.

And so this is the crisis that we have at the moment. Huge borrowings by sovereign states, and many are now becoming wary of buying what has been the safest and most reliable asset for many years. Bailouts for Greece and Ireland, defaults by Iceland, and many countries having borrowings that appear to be unrepayable, it doesnt make one confident of buying bonds.

And as sovereigns are usually more creditworthy that home purchasers, and rise in interest rates (or fall in bond prices) that they the sovereigns face, will turn into higher mortgage rates for borrowers.

With so many organisations and states over borrowed, the chances that we get through the first half of 2011 without an event dont look good to me.

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There was a similar broadcast on 5 Live with Declan with reps from the 3 main parties and a separate input from Tory Chris Patten (Baron Patten of Barnes). All relatively optimistic on the economy and especially Chris Patten who was called Fat Pang by the Chinese when he was Governor of Hong Kong in the approach to the Chinese takeover and he also got to wear the funny hats etc.

At any rate on 5 Live "Fat Pang" was absolutely 100% certain there would be no double dip :P

And maybe having once upon a time been called Fat Pang helped to get him on Declan's show.

Edited by billybong

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Supply is a lot less than we all want, mainly because banks are not repossessing people as much as they could, and we also have the wonder of SMI, where we all get to pay for someone to live in a house that they cannot afford. Then there are super cheap interest rates, that allow many to live in their homes obtained with liar loans that they couldnt really afford in a normal money environment.

Our biggest hope has to be a lurch upwards in interest rates. There has been some action there in recent weeks in the bond markets, but not enough to bring this house of cards down.

I dont see either of these changing much this year or next. = stagnant market

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Giordano,

that is pretty much the same thing.

Interest rates are determined in the bond markets. Assuming you know what a bond is, the price of the bond rises as inflation expectations fall, and as the creditworthyness of the borrow is perceived to rise. The prices also rise as players in the market change their preferences from spending now to spending in the future, and the best way to carry your wealth through to the future is with a bond from a credit worthy borrower, just so long as everyone continues to view things the same way.

And as bond prices rise, the yields on the bonds fall as the coupon or payout, is fixed.

And when, for whatever reason, players change their preference and no longer wish to buy bonds with their cash, then prices fall, particularly if there are many people seeking to borrow money via issuing bonds.

And so this is the crisis that we have at the moment. Huge borrowings by sovereign states, and many are now becoming wary of buying what has been the safest and most reliable asset for many years. Bailouts for Greece and Ireland, defaults by Iceland, and many countries having borrowings that appear to be unrepayable, it doesnt make one confident of buying bonds.

And as sovereigns are usually more creditworthy that home purchasers, and rise in interest rates (or fall in bond prices) that they the sovereigns face, will turn into higher mortgage rates for borrowers.

With so many organisations and states over borrowed, the chances that we get through the first half of 2011 without an event dont look good to me.

Thanks for that, leicestersq. You expect an event, but it won't be enough to bring down the house of cards, if I read correctly.

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Later this year we will look back and come up with three reasons why the HPC kicked in with such awesome and wondrous force this year:

1. Jobs

2. Jobs

3. Jobs

In that order.

The Koalishon will fight the crash earlobe and ankle but they will not be able to create jobs to sell people things they can longer borrow to pay for and this drop in demand will be the trigger. When the sheeple close the wallet its all over.

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Supply and demand is true. It's just not the supply and demand of houses as most people think. It is instead the supply and demand of cheap credit.

Just because there is a large supply.....you only have to look at all the tat and crap in the stores that they want you to buy, and it doesn't mean it is cheap...and it certainly doesn't mean anyone wants it.

The can manipulate all they like...but when push comes to shove we don't need all that they are offering to us, and will refuse to pay their price for it......low wages and higher living costs will make people think twice before they put their hands into their pockets and before they sign their next credit terms and conditions contract.......the ones that do sign without giving thought may be the ones that are least likely to stick to that contract. ;)

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Interest rates are determined in the bond markets. Assuming you know what a bond is, the price of the bond rises as inflation expectations fall, and as the creditworthyness of the borrow is perceived to rise. The prices also rise as players in the market change their preferences from spending now to spending in the future, and the best way to carry your wealth through to the future is with a bond from a credit worthy borrower, just so long as everyone continues to view things the same way.

True in a free market, but we now live in a Central Bank manipulated market where nice sums of money are being printed in order to pay far more for those (government) bonds than they are actually worth.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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