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Wurzel Of Highbridge

Is It Me Or...

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To me it now looks riskier than even 2007 to borrow a huge sum of money to buy property.

High, even 100% LTV mortgages.

Record low interest rates which can only rise.

Record property prices.

Real wages /disposable income falling.

Surely a recipe for disaster? At least in 2007/8 you could reason that interest rates would fall and wages were growing.

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Nope. There's no risk whatsoever. Everything has been fixed now and the world economy is basically going to grow for ever from now on. Houses will cost £5 million in 20yrs.

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Nope. There's no risk whatsoever. Everything has been fixed now and the world economy is basically going to grow for ever from now on. Houses will cost £5 million in 20yrs.

It will be interesting how these next few months look in 2 years.

People in NW buying a property at -40% from peak on a 5 year fixed may net better than those waiting for the next step down which will come with higher IR.

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To me it now looks riskier than even 2007 to borrow a huge sum of money to buy property.

High, even 100% LTV mortgages.

Record low interest rates which can only rise.

Record property prices.

Real wages /disposable income falling.

Surely a recipe for disaster? At least in 2007/8 you could reason that interest rates would fall and wages were growing.

Annual primary deficit = £120bn, or 7.8% of GDP.

Gross govt debt >90% of GDP.

Total national debt up from 460% (2008) to 520% of GDP (2013).

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Nope. There's no risk whatsoever. Everything has been fixed now and the world economy is basically going to grow for ever from now on. Houses will cost £5 million in 20yrs.

That could happen, perhaps, along with the 40 quid loaf of bread.

Difficult to see the pound rising in the long term, that's for sure.

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It is a recipe for disaster, and everyone buying is warned at least from one source. If people go ahead despite this, I wish them every unhappiness, and hope they regret the decision every minute of every day.

I certainly don't wish anyone ill, but I think that those who buy now will have cause to regret that decision in a few years.

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I think the Government should crack down on those people who encourage reckless lending and borrowing that will only lead to disaster in the longer term.

Oh- hang on- Help to Buy is a Government run scheme. :lol:

What's the solution when the people running the ponzi scheme are the same people you would expect to be shutting it down?

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Ok, lets think about this....

We are in 2020, the government have successfully inflated the housing market by 50% and devalued the pound by 50%.

Who has benefited? The price of everything (fuel, food etc..) has gone up and private sector wages will be static.

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Ok, lets think about this....

We are in 2020, the government have successfully inflated the housing market by 50% and devalued the pound by 50%.

Who has benefited? The price of everything (fuel, food etc..) has gone up and private sector wages will be static.

The banks, the landowners without big debts to service on static incomes, the building companies, politicians who get themselves re-elected due to the stupidity of the voters.

In short, the elite plus a few others in the game.

Inflation robs from the bottom up, deflation robs everyone, so the elite have chosen inflation.

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Ok, lets think about this....

We are in 2020, the government have successfully inflated the housing market by 50% and devalued the pound by 50%.

Who has benefited? The price of everything (fuel, food etc..) has gone up and private sector wages will be static.

Impossible. Devaluing the pound by 50% in seven years would require an inflation rate of around 9%. The yield on the 10yr would be something similar, and SVRs would be somewhere north of 12%. If inflation rises significantly then so too will mortgage costs. In fact UK mortgage costs can rise sharply even in the absence of domestic inflation, driven by the cost of money internationally. The UK couldn't survive three weeks at those rates, let alone seven years.

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In reply to Wonderpup, this is going to go on until those with expensive houses become poorer too

I think it will go on until the banks are rendered solvent and profitable off the back of a very broad diversified swathe of the population, I suspect it will take 4 years or so, total guesstimate

Thus 1 getting the government of the hook for a big chunk of debt, and 2 forcing these people to vote conservative out of sheer necessity of economic growth and rejection of an enhanced welfare state - this latter being a luxury when you need maximum profit to pay off your crazy mortgage

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I think it will go on until the banks are rendered solvent and profitable off the back of a very broad diversified swathe of the population, I suspect it will take 4 years or so, total guesstimate

Thus 1 getting the government of the hook for a big chunk of debt, and 2 forcing these people to vote conservative out of sheer necessity of economic growth and rejection of an enhanced welfare state - this latter being a luxury when you need maximum profit to pay off your crazy mortgage

I think this is a little more interesting.

The Bank of England pulls down the policy rate to near zero and sets up the Funding for Lending scheme in order to ensure that UK banks can make profits even on their existing lending. However, the 'reversion to the mean' then has to wait, what 18-24 months as the most conspicuous 'malpractice', (LIBOR rigging, PPI etc), comes out.

IMO the plan was to feed the banks profits so that they could acknowledge the losses on their UK prime/sub-prime mortgage books but it has turned out that these profits have been eaten up just paying out against a set 'liabilities' that were even more poorly understood in 2008 than the fact that the retail banks had been lending high-LTV self-certified interest only mortgages to anything with a pulse and a passing desire to borrow against UK property.

I think that you are absolutely right about how long it will go on for if the Bank of England and the Treasury (and various commercial interests) get what they want, but I am beginning to suspect that the behaviour of the Fed opened up a window of opportunity, that may now be closing.

India's present experience demonstrates that there is a colossal amount of hot money swilling around, like a million gallons of unwelcome seawater on the car deck of the Herald of Free Enterprise.

I am a mite sceptical of the ability of the Bank of England and the Treasury to get what they want once any difference between what is good for the US in the mind of the Fed and what is good for the UK opens up, which it inevitably will, sooner or later.

I think it's particularly important to pay due attention to what is good for the people who actually buy houses and pay rent. It doesn't matter what GDP does if the implicit 'spending power' doesn't end up in the hands of people who want to spend it on UK residential property.

I still think that we haven't even got started. How can you possibly wreck your economy betting on property, with a lot of that betting being allocated to residential property, and not have people at the epicentre (i.e. London and the South East) take a beating?

The bubble kicks off round about 1997. The ability of UK earnings to support it on a repayment basis at market rates taps out in about 2003-2004. The willingness of the world to support it on any basis through willing UK residents taps out in 2008. Then things correct a little everywhere in the UK.

Meanwhile, it gets really ugly elsewhere sending some new hot money off in search of somewhere with a predictable legal system.

We're now in a weird phase where the willingness of foreign actors backed by foreign money in a low transaction environment can make one thing look like another. With London dominating UK aggregate statistics and foreign money dominating London a myopic interest in the noise and not the signal might make you think that it is going to be OK, but it isn't.

House prices as driven by the UK banks willingness to finance idiotic house price valuations are the reason why the UK is totally ***ked. There is no rescue coming from this quarter - no return to normal. There is only another foolhardy step towards the bitter end. Anyone who has ever looked at this even glancingly knows it. Plain as the nose on your face. It's not a bear trap or a bull trap. It's a sheeple trap. Same as it ever was. They never learn. Only brute facts from outside will force a correction, but the longer we deliberately court that correction whilst doing nothing to avoid it, the more inevitable it becomes.

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