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OnlyMe

The New Giant Option Arm / Teaser Rate Scam

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In the mid 2000's greenspan (a disgusting example of the new breed of economy bending banksters) coaxed and teased millions into extreme debt with low initial payment rates to keep the american dream or to be more precise the image of the dream in the form of a debt funded nightmare alive. All of it ultra short-termism to keep himself in place, together with the polticians and banksters for that little bit longer and keep the pennies and grace / favours coming in.

We now have the same situation - artificially dumped interest rates and people taking on excess loans as if this was some kind of new normality, there is no difference to this situation compared to the height of the bubble then in regrds the UK - we are still in a central bank enfored bubble.

More and more are being sucked into the debt vortex with the repayment hell to follow. It has truly blown up already in the US, we are still due the inevitable results.

NOTHING has been fixed, the debt, the income diveregence, the derivatives market and shdow banking system, not one bit of it ha been fixed - in fact looking at recent derivatves exposures the bubble is bigger than ever. We are often told that the central bankers are historians of the 30's bust - if they are they learnt nothing, but have been hell bent on recreating the seeds of that particular bust with a few extra monetary time bombs thrown in for good measure.

The problem is now global, already at the point where it has long swamped sovereign nations ability to finance it.

Edited by OnlyMe

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Get out the wrong side of be did we? Feeling better after letting off some steam?

Yeah, this is HPC...no anger or politics here please.

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Hehe, I'm on a tight schedule to day so only chance to post. In fact this week may be the same.

Would somebody like to name anything that has been fixed after 3 years of trying? I seriously cannot think of one - apart from the bonus/pension pots of a few failed gamblers.

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Hehe, I'm on a tight schedule to day so only chance to post. In fact this week may be the same.

Would somebody like to name anything that has been fixed after 3 years of trying? I seriously cannot think of one - apart from the bonus/pension pots of a few failed gamblers.

my neighbours cat.

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We now have the same situation - artificially dumped interest rates and people taking on excess loans as if this was some kind of new normality, there is no difference to this situation compared to the height of the bubble then in regrds the UK - we are still in a central bank enfored bubble.

I am not sure that is right at all. There is plenty of evidence that a large deposit is now needed for borrowing secured on property. I have not had a letter begging me to take out a credit card in a couple of years. Previously, I could expect a long interest-free period and/or a cash payment for applying, but not any more. The newly unemployed people have probably also noticed things are not quite the same. I am guessing that the government have also noticed, assuming they have had a chance to look at the size of the deficit in the last few years.

I think the BoE would quite like a third bubble (postpones reckoning until after the current lot retire), but they might give up on noticing that the only thing they can achieve with any reliability is the destruction of the currency.

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I am not sure that is right at all. There is plenty of evidence that a large deposit is now needed for borrowing secured on property. I have not had a letter begging me to take out a credit card in a couple of years. Previously, I could expect a long interest-free period and/or a cash payment for applying, but not any more. The newly unemployed people have probably also noticed things are not quite the same. I am guessing that the government have also noticed, assuming they have had a chance to look at the size of the deficit in the last few years.

I think the BoE would quite like a third bubble (postpones reckoning until after the current lot retire), but they might give up on noticing that the only thing they can achieve with any reliability is the destruction of the currency.

Zero percent teaser credit card rates are back (primarily on transfers, but they are there). The big game now is mortgages at artificially low interest rates, we are talking just a couple of percent moves in base rates making huge changes in due interest over the loan repayments over the life of the mortgage. You are not getting the offers as you are not in the current credt rating profile, but others are.

BUt, primarily I am talking about the relationship bewtween teaser rates in the mortgage market and the parallels with the Us option arms are there, loans taken on the basis of ultra low rats into the forseeable future.

Edited by OnlyMe

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More and more are being sucked into the debt vortex with the repayment hell to follow. It has truly blown up already in the US, we are still due the inevitable results.

This.

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Yes a working couple with a live in tenant can afford quite a huge mortgage at 2.5% adjustable rate mortgage. The large deposit is a barrier to new home buyers, but it isn't a barrier to people who bought in the past(and didn't pull all the equity out).

For example the couple could have bought in London 10 years ago for £200,000 with a 200k mortgage. The home is now worth 500k for arguments sake, and they have paid off 100k of the 200k mortgage. So they have 400k in equity.

They could take out a mortgage for £350,000.. and purchase a home for 750k. Their monthly payments on the new 350k mortgage would be £1,380 a month. Affordable for many couples. See there you have an average couple who can pay the 750k price in London. (The median detached home in London is 830k I believe.)

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Yes a working couple with a live in tenant can afford quite a huge mortgage at 2.5% adjustable rate mortgage. The large deposit is a barrier to new home buyers, but it isn't a barrier to people who bought in the past(and didn't pull all the equity out).

For example the couple could have bought in London 10 years ago for £200,000 with a 200k mortgage. The home is now worth 500k for arguments sake, and they have paid off 100k of the 200k mortgage. So they have 400k in equity.

They could take out a mortgage for £350,000.. and purchase a home for 750k. Their monthly payments on the new 350k mortgage would be £1,380 a month. Affordable for many couples. See there you have an average couple who can pay the 750k price in London. (The median detached home in London is 830k I believe.)

Yes, that is the difference between the mortgage market and the credit/loan market (unless those are attached to mortgage equity). Banks have an ultra-myopic debt view - if is offset by propoerty then they accept almost any level of risk (or they did), now they require a 10/20/30% perecnt buffer - the bt that is theirs for you to lose. However even now some 100% loans and 90%+ deals are available. The absolute level of debt and the payment rate that people are hooking themselves too is the real danger for the borrower.

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Zero percent teaser credit card rates are back (primarily on transfers, but they are there).

All mine now come with (approx) a 3% fee, whereas the most I can sensibly borrow at is about 0.5% :-) Previously I could do all my spending on a 0% card, and often get cashback on it as well. In fact, I was able to borrow >20k from one particular CC provider as a fee-free interest-free cash advance. I am pretty sure there is nothing even approaching that available now, and I still have a perfect credit record, and still live in the same (expensive) postcode. BTW, the same provider have happily suspended the card because I dared use it to pay for an air-ticket for a flight originating in London but with a foreign airline. Admittedly, I could get it reactivated if I could be bothered to phone them and confirm it really was me who wanted a ticket with my name on it, but I cannot. As far as I can tell, I cost them several hundred pounds to acquire as a customer, but they are not so keen on retaining me. Perhaps they think I won't start paying interest all of a sudden after years of not doing so :-)

The big game now is mortgages at artificially low interest rates, we are talking just a couple of percent moves in base rates making huge changes in due interest over the loan repayments over the life of the mortgage. You are not getting the offers as you are not in the current credt rating profile, but others are.

Yes, but the question was whether this constitutes bubble-style lending. If you need a >20% deposit then there is no systemic problem as there is plenty of slack to stop a violent bursting. I am pretty sure we would not be where we are now if that sort of a deposit requirement applied all along.

BUt, primarily I am talking about the relationship bewtween teaser rates in the mortgage market and the parallels with the Us option arms are there, loans taken on the basis of ultra low rats into the forseeable future.

Same argument again. While long term rates are depressed by QE, there is nothing unsustainable about low-rate long-term fixed-rate mortgages, provided the originators hedge the exposure correctly. The crucial aspect is that with US-style ARMs the only way that most people using them could afford them long term was if house prices rose strongly (and they could refinance). I don't think that is the case with the current new borrowing.

Of course, it's not as if the existing bubble cannot yet properly pop. All I am saying is that it's not being inflated any more.

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Leveraging the ESFS is the most depressing thing I've heard this weekend.

440bn Euros into over 2 trillion at the stroke of a pen.

They all agree because it seems to be 'free' and avoids diffcult democratic process in the 17 countries involved.

is that right?...countries LEND the ESFS 440bn, which is a liability on the ESFS....how can they leverage a liability.?..oh I know, they lend the money on to the PIIGS, and then it becomes an asset that they can sell on to the people that lent it to them in the first place.

clever......NOT

I think Charles Ponzi was arrested for such a scheme.

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No I believe they looked all round and found the ECB under a cushion on the sofa and thought - "hey - why don't we get our bank to leverage up the ESFS?"

The 'equity' portion of the ESFS would then take the first 20% of any hits. Of course, things can't possibly get any worse than that.

you seem to be suggesting the ECB will print the money and then when it gets defaulted...which it will, you and I are going to have to fork out with our taxes?

Sounds like a plan to kick a whole box of cans into...lets say, November 2011.

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Same argument again. While long term rates are depressed by QE, there is nothing unsustainable about low-rate long-term fixed-rate mortgages, provided the originators hedge the exposure correctly. The crucial aspect is that with US-style ARMs the only way that most people using them could afford them long term was if house prices rose strongly (and they could refinance). I don't think that is the case with the current new borrowing.

Of course, it's not as if the existing bubble cannot yet properly pop. All I am saying is that it's not being inflated any more.

There is when the QE destroys earnings/savings/income against a rising basket of basic costs. On that case the resultant inflation/monetary devalution makes those payments (even at low rates) more and more difficult to make out of leftover income.

The US is hitting that point as well as the fallout from the teaser rate loan scam - a very negative reaction to rising costs over there and 40-50 million on food stamps.

Edited by OnlyMe

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Hehe, I'm on a tight schedule to day so only chance to post. In fact this week may be the same.

Would somebody like to name anything that has been fixed after 3 years of trying? I seriously cannot think of one - apart from the bonus/pension pots of a few failed gamblers.

US house prices are now -1std deviation cheap. Bubble completely burst.

Agree re the banksters though.

What makes you think there was ever any intention to fix them?

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Funnily enough I've seen nothing about where the ECB is going to get the money from. Only that 'the ECB will be leveraging the ESFS up'.

It sounds awfully like printing money to me, but never hear its name. The people (esp. Germans) may not want to hear it!

Anyone know?

EDIT:

http://uk.reuters.co...E78N1JS20110925

:lol:

Well the Germans have been perfectly happy creating inflation so long as it didn't end up on their doorstep.

They wan't the truth? They can't handle the truth!

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They all agree because it seems to be 'free' and avoids diffcult democratic process in the 17 countries involved.

Democracy is for wimps- Banktatorship is the new black these days. Perhaps they know, deep down, that if asked to choose between maintaining the lifestyles of the rich and leveraged or taking on decades of debt servitude for themselves and their kids they may not do the 'right thing'.

People can be so fickle when it comes to these things. Best not to ask.

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Yes a working couple with a live in tenant can afford quite a huge mortgage at 2.5% adjustable rate mortgage. The large deposit is a barrier to new home buyers, but it isn't a barrier to people who bought in the past(and didn't pull all the equity out).

For example the couple could have bought in London 10 years ago for £200,000 with a 200k mortgage. The home is now worth 500k for arguments sake, and they have paid off 100k of the 200k mortgage. So they have 400k in equity.

They could take out a mortgage for £350,000.. and purchase a home for 750k. Their monthly payments on the new 350k mortgage would be £1,380 a month. Affordable for many couples. See there you have an average couple who can pay the 750k price in London. (The median detached home in London is 830k I believe.)

The problem is that they may find their repayments turn out to be £3500 pm when interest rates move back to normal or above. Permanently low interest rates actually have actually seriously exacerbated the asset bubble. Very dangereaux

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  • 337 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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