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nohpc

Boe And Mortgage Interest Rates

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Low interest rates are the only thing keeping house prices up at the moment.

Unless mortgage rates go up significantly (includes new and old mortgages) house prices will not drop any faster than a snails pace if at all.

People don't really care if their house might drop in value if their mortgage is ultra cheap compared to renting.

Availability of mortgages is not relevant as sellers won't sell unless they are forced to by rising mortgage rates.

It is not looking like an interest rate rise won't happen until late 2012 at the earliest. This assumes that for some reason the economy will be in better shape by then, which it probably won't.

I wouldn't be surprised if we are still sub 2% BOE rate by 2015 with a substantial drop in real house prices but weak growth in nominal house prices.

I'm torn between two camps as I have a very cheap mortgage on a London property which I might sell in the next year or two or hold onto long term. However, I would like to buy a family home for my wife and I in the next year in the 500,000 price range so I would rather see a substantial rate rise and crash in prices.

Edited by nohpc

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Low interest rates are the only thing keeping house prices up at the moment.

Unless mortgage rates go up significantly (includes new and old mortgages) house prices will not drop any faster than a snails pace if at all.

People don't really care if their house might drop in value if their mortgage is ultra cheap compared to renting.

Availability of mortgages is not relevant as sellers won't sell unless they are forced to by rising mortgage rates.

It is not looking like an interest rate rise won't happen until late 2012 at the earliest. This assumes that for some reason the economy will be in better shape by then, which it probably won't.

I wouldn't be surprised if we are still sub 2% BOE rate by 2015 with a substantial drop in real house prices but weak growth in nominal house prices.

I'm torn between two camps as I have a very cheap mortgage on a London property which I might sell in the next year or two or hold onto long term. However, I would like to buy a family home for my wife and I in the next year in the 500,000 price range so I would rather see a substantial rate rise and crash in prices.

Sell your London property and buy a perfect family home in a far nicer part of the country with a little or no mortgage or plenty of change left over if you are lucky.....You can always move back...but I bet you won't want to. ;)

Edited by winkie

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Sell your London property and buy a perfect family home in a far nicer part of the country with a little or no mortgage or plenty of change left over if you are lucky.....You can always move back...but I bet you won't want to. ;)

There is only 80,000 pounds of equity in the London property (based on a selling price 10% less than what I bought it for in 2005) so not enough to buy a nice family home.

The main reason for selling the London property would be to port the tracker mortgage which is lifetime 1.99% above base rate although I have a feeling there might be a good time to fix in a year or so anyway.

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Ahhhhgh, found the perfik place for you and the family

€60,000 Detached House|3 Bedrooms|2 Bathrooms

under 80k, on 1 acre and change left for the pub

low cost detached property

I'm not an Ireland VI, I just think it is much better value think the UK, a bit like buyig wine in France during 2006. :rolleyes:

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Low interest rates are the only thing keeping house prices up at the moment.

Unless mortgage rates go up significantly (includes new and old mortgages) house prices will not drop any faster than a snails pace if at all.

People don't really care if their house might drop in value if their mortgage is ultra cheap compared to renting.

Availability of mortgages is not relevant as sellers won't sell unless they are forced to by rising mortgage rates.

It is not looking like an interest rate rise won't happen until late 2012 at the earliest. This assumes that for some reason the economy will be in better shape by then, which it probably won't.

I wouldn't be surprised if we are still sub 2% BOE rate by 2015 with a substantial drop in real house prices but weak growth in nominal house prices.

I'm torn between two camps as I have a very cheap mortgage on a London property which I might sell in the next year or two or hold onto long term. However, I would like to buy a family home for my wife and I in the next year in the 500,000 price range so I would rather see a substantial rate rise and crash in prices.

I'd suggest that the flaw in this hypothesis is that markets, in particular property, are set on the margins, not the mainstream.

Example: the houses in one street were 500k at peak of the boom. Thanks to low transaction levels none have sold since. 99% of the mortagees are solvent. One is not. That one goes for a knock down price. What price does the surveyor/purchaser valuing the next one see as typical?

Look at it this way. There are more savers than debtors. So if the base rate went up to 5% tomorrow, there wouldn't be much of a problem would there, as not that many people have millstone mortgages, so the effect would be minimal.

And actually, it would, for most people. Except those on the margins.

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Low interest rates are the only thing keeping house prices up at the moment.

No so sure not everyone is on an ultra low tracker the real rates are much higher probably between 3.5 - 6 if you account for all types of mortgage. What is happening is that the banks are making fabulous returns a business model where 700% is the markup at least. It is a sign of how shot they are that this isn't always translated into bottom line profits.

The mortgage market is fractured and not working through low volume like the housing market. When....any form of normaility returns to the market the spread will be closer and more competitive so a move in interest rates will not automatically translate to a linear 1% on BOE = 1% on the market rates in general.

As for your wish to see a property crash through substantial rate rises so you can buy a family home, you could be displacing a family who just happen to have fallen on hard times illness, job loss etc.

However on here the desire for a property crash so doing nothing other than be in the right place to buy a house you couldn't otherwise afford is seemed as a good thing whilst making a profit through the same circumstances when profits rise is seen as some form of evil is very strange.

It is just speculation by another name - if you want a 'nice' house plan and work towards it or as we say believe in God but keep rowing.

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The main reason for selling the London property would be to port the tracker mortgage which is lifetime 1.99% above base rate although I have a feeling there might be a good time to fix in a year or so anyway.

I can pretty much guarantee you that there will never be a fixed rate deal that beats your 1.99% tracker. This whole "good time to get a fixed deal" thing is a myth, a sales ploy - the moment that prospective BoE rate rises start to fall with the usual 2/3 year tracker fixed rate term window, fixed rate deals will be pulled or rates hiked.

Remember that fixed rate deals are designed to benefit the lender, not you !. They are one of the biggest financial con schemes ever designed.

[corrected]

Edited by goldbug9999

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I can pretty much guarantee you that there will never be a fixed rate deal that beats your 1.99% tracker. This whole "good time to get a fixed deal" thing is a myth, a sales ploy - the moment that prospective BoE rate rises start to fall with the usual 2/3 year tracker term window, fixed rate deals will be pulled or rates hiked.

Remember that fixed rate deals are designed to benefit the lender, not you !. They are one of the biggest financial con schemes ever designed.

+1

Life time tracker is the only way to go. Even if rates do go up making the 5 year fix look good what deal will you get after the 5 years?

The answer to that is possibly none because if rates go up that much house prices will be through the floor and you will be in negative equity.

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No so sure not everyone is on an ultra low tracker the real rates are much higher probably between 3.5 - 6 if you account for all types of mortgage. What is happening is that the banks are making fabulous returns a business model where 700% is the markup at least. It is a sign of how shot they are that this isn't always translated into bottom line profits.

The mortgage market is fractured and not working through low volume like the housing market. When....any form of normaility returns to the market the spread will be closer and more competitive so a move in interest rates will not automatically translate to a linear 1% on BOE = 1% on the market rates in general.

As for your wish to see a property crash through substantial rate rises so you can buy a family home, you could be displacing a family who just happen to have fallen on hard times illness, job loss etc.

However on here the desire for a property crash so doing nothing other than be in the right place to buy a house you couldn't otherwise afford is seemed as a good thing whilst making a profit through the same circumstances when profits rise is seen as some form of evil is very strange.

It is just speculation by another name - if you want a 'nice' house plan and work towards it or as we say believe in God but keep rowing.

I have no problem with the ethics of making money from property but I feel that property is overpriced and if families have bought property when it is cheap and wasted it by MEWing then they have to pay the sacrifice if they can't keep up the payments.

This is the UK. Nobody needs to be homeless.

I'm lucky enough to be on a well above average salary (although I'm not rich) but see myself priced out of the type of houses that I feel I should be able to live in. I have saved more money than I spend so I feel it is my turn to get a house. I won't blow it like the last generation of MEWers.

I blame this website for making me quite passionate about not having much debt to the point that I feel that large debts are similar to slavery. If I didn't feel that way I could go out and buy a house now.

I agree about sticking with the lifetime tracker. I can afford much higher rates so I doubt I'll ever go back to a fixed.

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Remember that fixed rate deals are designed to benefit the lender, not you !. They are one of the biggest financial con schemes ever designed.

Not really. Banks don't normally whole the risk of the fixed on their book. Their do an IR swap for that and pass the risk on after pocketing a margin.

Some people in the market still obviously think the interest rate will not rise (or have matching risk that requires them to be sure of a fixed rate payment).

Back in 07 when inflation was raging, everyone thought fix was a good idea... no one forsaw a 0.5% rate. With the amount of chaos going on, anything

can happen.

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It's continued loose lending, liar loans etc that are keeping house prices up. It's government policy. The FSA have been ordered to stop thinking about sensible mortgage lending.

http://www.independent.co.uk/news/business/news/i-would-have-been-denied-mortgage-says-minister-2145051.html

http://uk.finance.yahoo.com/news/Banks-gone-far-restricting-tele-1275629226.html

The OBR have forecast an extra £300bn of household debt in this parliament.

http://www.guardian.co.uk/politics/2011/apr/02/family-debt-burden-government-figures

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As for your wish to see a property crash through substantial rate rises so you can buy a family home, you could be displacing a family who just happen to have fallen on hard times illness, job loss etc.

Aww cant have a HPC because some people may have an unfortunate change in their circumstances. Hard times are one of the triggers for a house price crash. Interest rates can rise. We've seen they can fall.

Every individual has responsibility to interpret market data and make their own decisions. Including save or spend or take on big debt.

It's not like many owners fret about renters and house prices. Many want low rates and aren't thinking about renters wanting value after a decade of reckless borrowing pushed up values of their house. Some want house prices to continue go up and up. Some even rejoice in not having very little in cash savings, believing cash to be useless and becoming worthless. It's a market.

Too many reckless debt buyers have displaced the prudent.

Why would I feel anything if/when Lion's strategy turns against him? Or any other person with similar views. He's acted accordingly to how he interprets market data, and wants to see low rates and QE to further his own best interests for the value of his home. He sees low interest rates continuing for many years to come, and is happy as it would . He's not worrying about non owners, as are few other owners with big mortgages. I'm taking measures to protect and further my own position where cash on deposit is the main element. Winners and losers and home owners can't be allowed to have blanket win protection.

Over the last five years almost 10% of our mortgage has been eroded away because over this period the difference between relatively high inflation and our very low interest rates is worth about 10% of the outstanding mortgage. These are essentially 10% written off by the bank, and it will continue for quite some time. If it continues like that - and there is any chance it will - we will only have to pay back about half of the loan as the other half will be inflated away over the remaining ~21 yrs term.

Forbearance is only a risk if both of us lose their jobs. This would however always be a risk, in any sitiation. All breadwinners losing their jobs in a family is always a serious situation, if you have a mortgage or not. Our savings would tick us over a few months, and then you are normally given another 6-12 months before eviction, so there is a good chance in that time to find another job.

not necessarily if it is the house you live in - you can live in a house, grow vegetables in the garden - but you cannot live in cash or eat cash. it has no intrinsic value, and will in a real financial crisis revert to that value - zero.

also, our house is not the only asset we have: we also have a significant exposure to shares (our pension pot 1), bonds (our pension pot 2) and physical gold (emergency reserve). I am also a shareholder and director of the company I work for which increases my job security - this was achieved by investing in an excellent both academic (Master, PhD) and business oriented (MBA) education (another important asset). cash however is not part of our savings, apart from a bit of cash in the current account to pay the bills.

then we have a good network of friends and family, and are quite inventive ourselves. these things will actually be far more important in a real crisis than any materialistic assets.

Everyone can only speak for themselves, and most have vested interests. I am clearly in favour of low interest rates. The interest part of our lifetime BOE + 0.63% tracker repayment mortgage is currenty just a few hundred pounds (and we bought a nice semi in North London last year, porting the very good mortgage deal from the property we sold). Most of our savings are in shares (£100k +), which also did well since 2008, and they would probably do less well if interest rates were higher - again a vested interest we have.

Every additional percentage point of BOE interest rate would add about £300 interest we have to pay per month. We could afford a raise of a few percentage points quite easily, but it would not be in our interest: An increase of 5% would currently mean we have to pay £18,000 per year in additional interest per year . It is far better for us to use this cash towards capital repayment, our pension pots, our son's private school fees, holidays, refurbishments etc. For clearing debts, saving for the future and spending for our lives, so to speak. As high achievers and earners we are taxed far too much by this government anyway, so we deserve not also to be ripped off by high interest rates.

A lot of people, organisations and ultimately (and most importantly) banks and governments are in similar situations, if not worse - some (like most governments) may not be able to afford to pay for higher interest rates.

So I fear, there really has been a paradigm change, and low interest rates are here to stay - for years, if not decades. Whatever comes then is unpredictable. But I hope and think the low interest period will last long enough so I do not need to worry about having ever to pay any significant interest on our mortgage again (10-12 more years should do it for me).

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Interest rates used to calculate SMI payments

SMI is paid at the level of the Bank of England’s published Average Mortgage Rate - currently 3.63 per cent. It will only be adjusted in future when the published average mortgage rate differs by 0.5 per cent or more.

I came to this thread searching where I can find data on BoE's Average Mortgage Rate, that's used to calculate SMI.

Can't seem to find the source of this published rate anywhere. Not sure if it's reduced with some of the deals banks have been trying tempt new borrowers with, or risen after some deals have seen SVRs tick up.

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Why would I feel anything if/when Lion's strategy turns against him? He sees low interest rates continuing for many years to come, and is happy as it would.

Yep it could be a new paradigm. This time it could be different. Er. Exactly what mechanism can keep interest rates ultra low for decades without horrifically devaluing sterling?

Greg I am not sure what point you are trying to make. Either the few foolish people who over extended themselves and borrowed too much at the top of a housing mania are left to fail or a whole generation (and counting) not to mention the economy and UK standard of living is damaged. Don't you have kids?

GB

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Yep it could be a new paradigm. This time it could be different. Er. Exactly what mechanism can keep interest rates ultra low for decades without horrifically devaluing sterling?

+1

The idea that a low base rate will lead to stable low mortgage interest rates which support current prices is a very suspect piece of conventional wisdom. Not least because rates really aren't that low.

Trends+in+lending+October+2012+Chart+2.6.png

Source: Bank of England Trends in Lending October 2012

My thesis is this. The Bank of England and the Treasury are not trying to support house prices. They have two separate but related priorities. Firstly they must keep the interest costs that the government pays on its own debt as low as possible because of the ratio of debt to GDP. This is the purpose of QE and this is why generally the costs of borrowing are low and savings rates are really low. Secondly, they feel that they must "fix" the banks. Fixing the banks, according to the Bank of England and the Treasury means returning the banks to solvency. This is going to be facilitated by maintaining profits (via schemes like Funding For Lending) and allowing the banks to take their losses only when they are ready to take them (which is why forbearance is being allowed and encouraged).

One way to look at it is, "What can't the banks control?". They can't control earnings, utility costs, transport expenses and food. Hence they effectively have to "solve for x" and gouge as much as they can, given the things that they cannot control. What does that look like?

FSA+Mortgage+spreads+2005-2012.png

Source:FSA Mortgages Product Sales Data Trend Report 2005-2012 August 2012

The banks have a short-term incentive to keep house prices where they are but they own only a fraction of the housing stock and they don't wholly control even that portion. I'd argue that they only control the portion that are in arrears, and even then their hands are tied a little with regard to what they can do. If they repossess swathes of the country and start selling they will crystallise their losses and move the value of their remaining security against the remaining mortgages in the wrong direction. Further, the estate agents and the banks both have an aligned medium term goal: they need to see transactions.

IMO it will be sentiment on the part of the sheeple that breaks the deadlock, and it will be a downwards move because an upwards move is impossible.

Upwards is impossible because the statistics evidence that the mortgage market really has changed. The weapons of choice for the final phase of bubble inflation were high-LTV IO and self certification. IO really is gone and this graph shows that self-certification at high LTV is also gone.

Income+verification+by+LTV.png

Source: FSA Mortgages Product Sales Data Trend Report 2005-2012 August 2012

How can we maintain yesterday's prices when the lending practices that facilitated them are gone? Those prices were an artefact of an unsustainable credit boom, and that boom is over. People are too besotted with bricks and mortar to work it out and allow sentiment to respond quickly to changes in the real economy, but eventually, like death by a thousand cuts, sentiment will align with the new reality.

Merryn Somerset Webb on Radio 4's Moneybox talking about the what the "market wants" is just daft journalese. The market is where buyers meet sellers and where prices are discovered. In the context of UK housing most important factors are the banks' willingness to lend and the appetite of the sheeple for credit and the extent to which earnings allow the sheeple and the banks to meet somewhere in the middle. By my reckoning we remain three from three on for a crash. The banks are trying to deleverage. The sheeple are edgy about the continuing depression and have lost their appetite for credit. QE will keep inflation ticking along nicely and force the prudent to set aside more of their income as savings, both consequences keeping the share of the sheeple's income available to service debt under sustained pressure.

Randy Newman singing "I'm dead, (but I don't know it)" at the

.

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My thesis is this. The Bank of England and the Treasury are not trying to support house prices.

The banks have a short-term incentive to keep house prices where they are but they own only a fraction of the housing stock and they don't wholly control even that portion.

IMO it will be sentiment on the part of the sheeple that breaks the deadlock, and it will be a downwards move because an upwards move is impossible.

Upwards is impossible because the statistics evidence that the mortgage market really has changed.

1. Given the number of indemnity schemes and FLS, I don't know how you draw that conclusion.

2. If they do support house prices, they can get their hands on the equity that isn't mortgaged.

3. I've given up on sheeple sentiment ever changing in the UK. The people are going to get what they want. Debt from cradle to grave. They are clearly happy enough to just take on longer and longer mortgage terms based on two incomes.

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The banks have a short-term incentive to keep house prices where they are but they own only a fraction of the housing stock and they don't wholly control even that portion. I'd argue that they only control the portion that are in arrears, and even then their hands are tied a little with regard to what they can do. If they repossess swathes of the country and start selling they will crystallise their losses and move the value of their remaining security against the remaining mortgages in the wrong direction. Further, the estate agents and the banks both have an aligned medium term goal: they need to see transactions.

IMO it will be sentiment on the part of the sheeple that breaks the deadlock, and it will be a downwards move because an upwards move is impossible.

That's a strength at the same time isn't it. Maybe the banks will eventually come around to wanting house prices to fall so they can write mortgages for all of the people in late 30s and into their early 40s who want to trade up.

The need for transactions. It's not happening for them despite all the tricks they've tried. When will the banks be ready? They'd be much better off not lending from the Funding for Lending scheme and giving the treasury excuses. Hints they might do that with statements that borrowers still need to meet stringent lending criteria, for the very few that are lining up to borrow.

Houses currently owned by older people outright, or packed with equity. Get new mortgages written on them, at much lower prices, and they're making 200% at 5/6% interest rate over 25 years. Immediately helping with their solvency and the books looking far more genuinely healthy. That would balance out a lot of the falls in property they are currently exposed to, maybe.

Agree about sentiment. More hopeful than ever attitudes for buyers and trade-uppers is hardening up, and focusing on value. Given the worrying state of their financial affairs for even solvent people, and their assessment of the future, wouldn't be surprised if fewer people even want to trade up and have decided to make-do in homes that are still fit for purpose, rather than take the risk of more debt. Leaving more sellers stranded. Big crash coming in my opinion.

Great post Chairman, and will have to re-read it a few times to get the most out of it.

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it's BJ95 in this link (or via Table G1.4 here - Household new business rates tab). Not made particularly easy to find as spreadsheet format changed a while ago omitting that helpful word 'average'.

Thanks so much for this. Can't open .xls spreadsheet files on this machine, but can on my other. They don't make it easy do they, were I know some of the other BoE report files are also in PDF.

Not exactly easy for those on SMI to keep track of things, perhaps signs their rate of SMI is going to fall, if the average (now effective?) rate is falling.

Wouldn't expect SMIers to even check anyway. There was something like 9 months notice about SMI dropping from 6.08% to 3.63%, announced in Parliament and reviewed many times in the news and on forums including HPC. When implementation day was coming around, lots of people including Shelter complaining SMIers didn't know about it. SMIers not bothered to keep abreast of any news which could seriously affect their ability to keep a home they can't afford to pay their debts on.

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1. Given the number of indemnity schemes and FLS, I don't know how you draw that conclusion.

2. If they do support house prices, they can get their hands on the equity that isn't mortgaged.

3. I've given up on sheeple sentiment ever changing in the UK. The people are going to get what they want. Debt from cradle to grave. They are clearly happy enough to just take on longer and longer mortgage terms based on two incomes.

1. I guess it's splitting hairs, but I would argue that the government are not sustaining house prices as an end in itself, and in due course, once the banks can handle it, a collapse in house prices could be the way forward in order to get aggregate demand going. So whilst they are definitely effectively supporting house prices now, I do not believe that they will continue to support house prices in the medium term (to 2018) or long term (to 2028).

2.Trying to get your hands on equity presupposes that the equity is worth having. If the cost of supporting house prices is ruinous double digit inflation, the discounted value of that equity is not worth having.

3. I always think about it like this. The sheeple's relationship with UK property is just like an idiot poking a dead dog with a stick and hoping that it will get up and run. And it might be apparently reasonable to say "Well, if they haven't worked it out by now, they'll never work it out!" I am optimistic that they will work it out, and I believe that they will work it out because it will become increasingly obvious, as the dog rots...

They'll work it out eventually.

[Edit: typo]

Edited by ChairmanOfTheBored

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They'll work it out eventually.

Wouldn't the tax system have to change for that to happen? They can leverage up and any profit is tax free, what else is there?

Has a US slant but discusses tax http://danielamerman.com/

Anyway we have Carney coming so I'm sure with such a star everything will be OK in the UK

3: Mark Carney, superstar

Mark Carney was already the world’s most admired central banker when the year began, but by the time 2012 ended, he had achieved the unprecedented and been poached by the Bank of England -- a move certain to solidify his status in the admittedly dry annals of central banking history.

Rumours had been swirling for months that the BoE wanted Carney to work his Canadian magic on Britain’s debt-laden economy, but it wasn’t until late November that the move was confirmed.

http://www.huffingtonpost.ca/2012/12/25/top-business-stories-2012-canada_n_2361405.html

How does that compare with this?

OTTAWA — Scott Hannah says business just keeps getting busier.

The head of Credit Counselling Services in Vancouver says the number of people coming for help was up seven per cent this year and there’s no sign that pace is going to let up.

And making matters worse, the jump followed a nearly 30 per cent increase in 2011.

"Not only did it grow, but we’re seeing that the average indebtedness of consumers continues to creep up," Hannah said of his clients.

Personal debt levels climbed to record levels in 2012.

Both Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty spent much of the year warning Canadians about the perils of too much debt.

Lured in part by low interest rates and trapped in part by a booming real estate market that has driven up home prices in the country’s largest cities, Canadians have been borrowing like never before.

According to Statistics Canada, the household debt to income ratio has risen to a record high of 164.6 per cent in the most recent assessment, approaching levels reached in the United States before the housing crash of 2007-08.

http://www.montrealgazette.com/mobile/business/top-stories/Household+debt+Number+Canadians+seeking+help+keeps/7746297/story.html

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I can pretty much guarantee you that there will never be a fixed rate deal that beats your 1.99% tracker. This whole "good time to get a fixed deal" thing is a myth, a sales ploy - the moment that prospective BoE rate rises start to fall with the usual 2/3 year tracker fixed rate term window, fixed rate deals will be pulled or rates hiked.

Remember that fixed rate deals are designed to benefit the lender, not you !. They are one of the biggest financial con schemes ever designed.

[corrected]

The bankstas already pulled that one.

Cos they all now "share your personal information" (for their gangsta activities) they work out the highest rates they can get away with (between themselves) from Mortgagees without making too many go under.

As soon as BOE moved base rates down - Banks all upped their mortgage interest rates.

The gap between base and charged rates is now the highest EVER ;)

It is one of their propagandised 'illusions' that rates are low - with wages stalled or dropping (except for top 10%)

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1. I guess it's splitting hairs, but I would argue that the government are not sustaining house prices as an end in itself, and in due course, once the banks can handle it, a collapse in house prices could be the way forward in order to get aggregate demand going. So whilst they are definitely effectively supporting house prices now, I do not believe that they will continue to support house prices in the medium term (to 2018) or long term (to 2028).

This is my viewpoint too, and what is sustaining me at the moment.

2.Trying to get your hands on equity presupposes that the equity is worth having. If the cost of supporting house prices is ruinous double digit inflation, the discounted value of that equity is not worth having.

Presumably

3. I always think about it like this. The sheeple's relationship with UK property is just like an idiot poking a dead dog with a stick and hoping that it will get up and run. And it might be apparently reasonable to say "Well, if they haven't worked it out by now, they'll never work it out!" I am optimistic that they will work it out, and I believe that they will work it out because it will become increasingly obvious, as the dog rots...

They'll work it out eventually.

[Edit: typo]

2014-15-ish

Edited by LiveinHope

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Wouldn't the tax system have to change for that to happen?

I really think not. The tax advantages of leveraged betting on property are useless if you can't make an investment gain on property.

The investment gains that were made in the past were a consequence of the expansion of credit. We've now reached a point where the system simply cannot absorb any more debt and is choking to death on the debt it has already tried to swallow.

Carney is an irrelevance.

I'd bet that if Osborne went to all that trouble to get him, then Carney is inclined to do what Osborne and his policy wonks at the Treasury want to do anyway. Osborne's intentions have already been clearly signalled. Osborne wants to eliminate the deficit, he wants to reduce the ratio of debt to GDP and he wants GDP growth. He's gone out and found someone willing to exercise monetary policy in service of those aims, but, and this is a very, very big "but", the economy is in an extremely fragile state and the fact that choices are made in order to elicit a given change in the system (e.g. cut public sector spending in order to reduce the deficit) does not mean that the policies will produce the intended changes. The economy is on one path, policy changes may perturb the system and set it on a different path but how different could that path be? I suspect that the inevitable consequence of there being too much debt in the system is that the amount of debt will reduce, regardless of policy. There is no other story since the late 1980s apart from a massive continuing credit boom.

Then in October 2008 we had to bailout RBS and Lloyds TSB. Then in March 2009 the government had to resort to getting the Bank of England to buy its debt with new money created out of thin air. Then in July 2012 the government had to use Funding for Lending to bribe the banks to lend at all and most of what they appear to have done with it is try to poach each others customers with 60% LTV who can't afford the SVR.

Transaction volumes are comical and it seems fairly clear that all that is supporting the London bubble is speculative investment from overseas and the world's super rich buying up London Prime. The speculation will eventually run out of steam. The impact of the world's super rich buying London prime will reduce as increasingly it becomes one foreigner selling to another foreigner (instead of foreign money buying out a UK resident who uses the money to go and buy somewhere in the sticks). This sucker is running out of rope.

I would argue that we are off the map and about to see something exciting and new regardless of what the Bank of England and the Treasury want. For Carney to be relevant to what happens next, he needed to have been here in about 1995 and he needed to have had both power and a willingness to exercise it.

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I really think not. The tax advantages of leveraged betting on property are useless if you can't make an investment gain on property.

The investment gains that were made in the past were a consequence of the expansion of credit. We've now reached a point where the system simply cannot absorb any more debt and is choking to death on the debt it has already tried to swallow.

Carney is an irrelevance.

I'd bet that if Osborne went to all that trouble to get him, then Carney is inclined to do what Osborne and his policy wonks at the Treasury want to do anyway. Osborne's intentions have already been clearly signalled. Osborne wants to eliminate the deficit, he wants to reduce the ratio of debt to GDP and he wants GDP growth. He's gone out and found someone willing to exercise monetary policy in service of those aims, but, and this is a very, very big "but", the economy is in an extremely fragile state and the fact that choices are made in order to elicit a given change in the system (e.g. cut public sector spending in order to reduce the deficit) does not mean that the policies will produce the intended changes. The economy is on one path, policy changes may perturb the system and set it on a different path but how different could that path be? I suspect that the inevitable consequence of there being too much debt in the system is that the amount of debt will reduce, regardless of policy. There is no other story since the late 1980s apart from a massive continuing credit boom.

Then in October 2008 we had to bailout RBS and Lloyds TSB. Then in March 2009 the government had to resort to getting the Bank of England to buy its debt with new money created out of thin air. Then in July 2012 the government had to use Funding for Lending to bribe the banks to lend at all and most of what they appear to have done with it is try to poach each others customers with 60% LTV who can't afford the SVR.

Transaction volumes are comical and it seems fairly clear that all that is supporting the London bubble is speculative investment from overseas and the world's super rich buying up London Prime. The speculation will eventually run out of steam. The impact of the world's super rich buying London prime will reduce as increasingly it becomes one foreigner selling to another foreigner (instead of foreign money buying out a UK resident who uses the money to go and buy somewhere in the sticks). This sucker is running out of rope.

I would argue that we are off the map and about to see something exciting and new regardless of what the Bank of England and the Treasury want. For Carney to be relevant to what happens next, he needed to have been here in about 1995 and he needed to have had both power and a willingness to exercise it.

I enjoy reading your posts from 12k away......In laymans terms, housing costs to purchase will remain static at best till the..........I will remain a renter....

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  • 284 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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