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Sancho Panza

Boe Governor Mark Carney Is Ready To Pop Any Housing Bubble

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Telegraph 28/1/13

' "The Bank is acutely aware of the risk of unsustainable credit and house price growth and will be monitoring it closely," he said in Nottingham on Wednesday.

"The important thing to recognise is that we now have tools other than interest rates that can be used to contain risks in the property and financial sectors. We are now fully prepared to deploy them if that were needed."

The Bank could, he said, use its newer tools to recommend that banks and building societies "restrict the terms on which new credit is provided, or even to raise capital requirements on mortgage or other types of lending".

This would allow the Bank to avoid raising wider interest rates across the economy even as it acted to put the brakes on specific areas. '

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Telegraph 28/1/13

' "The Bank is acutely aware of the risk of unsustainable credit and house price growth and will be monitoring it closely," he said in Nottingham on Wednesday.

"The important thing to recognise is that we now have tools other than interest rates that can be used to contain risks in the property and financial sectors. We are now fully prepared to deploy them if that were needed."

The Bank could, he said, use its newer tools to recommend that banks and building societies "restrict the terms on which new credit is provided, or even to raise capital requirements on mortgage or other types of lending".

This would allow the Bank to avoid raising wider interest rates across the economy even as it acted to put the brakes on specific areas. '

The 'tools other than interest rates' he refers to are lending rules - thse common sense things - 'you can have up to 2.25 your income sir'......At present it is still 4x without batting an eyelid.... WHY OH WHY? IT IS MADNESS. It is causing house prices to fit the lending multiples plus deposit and on two incomes aswell. :ph34r:

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The Telegraph comments section is becoming steadily less enamoured with the new Governor. Here's half the top six comments on the article ( which is crud written by one of their in-house property rampers btw).

jimmy66 Today 10:53 AM

What tools do you have ?

None .. you are printing money with the help to buy scheme and keeping interest rates low ... you are fueling the house price rise - so what the ****** are you talking about ?

Two Bob Today 12:20 PM

How about just ending help to buy? For ****** sake.

purepressed Today 01:11 PM

We are STILL to this very f****n day in a HOUSE PRICE BUBBLE you dumb donkey. The previous bubble built up over two decades of reckless lending and lunatic nimbly planning laws NEVER deflated. And the old who are the majority do not want it to burst and will vote for any politician who will keep the racketeering going!!!

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Here's half the top six comments on the article ( which is crud written by one of their in-house property rampers btw).

Great comments from the article .

The only 'tool' in his box is himself , he is completly useless , an overpaid clueless puppet , f***ing spanner .......

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"any" surely he means "the".

surely a market that is not free is fixed/corrupt and should be avoided at all cost.

is he admitting the banks have fixed the price of houses? cue the REAL mis-selling scandal.

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George will be pleased by those comments, clearly Labour trolls who have a limited grasp of the English language and need to resort to the f word. Proves he is right and HtB is the policy that has ensured victory at the election. In any case Carney has said he and the BoE does not monitor asset prices so will do nothing as there is nothing to monitor and no action to be taken.

Not sure if you are being ironic. Con victory at the election?

Polling holding steady at a Labour lead of between 5-10%, translating to a majority of ~75, although it was over 90 at points in the past few months.

http://ukpollingreport.co.uk/uk-polling-report-average-2

http://ukpollingreport.co.uk/ukpr-projection-2

Trolls perhaps, most likely UKIP ones. I choose the most profane deliberately. Try and find a supportive comment amongst the rest though. If Osborne thinks that an absolute slating for his policy is a demonstration of its strength, he'll be brimming with confidence going into GE'15 at this rate.

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I can't decide whether he just thinks everyone is dumb and he can blind us with statistics or whether he's as out-of-touch as Merv and crew were before the credit crunch.

This is from his speech, reassuring us that house prices aren't yet a cause for concern:

"Mortgage approvals are currently running at only a little more than half,

and transactions a little more than two-thirds, of pre-crisis levels.

Households’ debt servicing costs relative to income are below their 20-year

average, and houses cost the same relative to earnings as they did in 2003."

Well, duh - yes the P/E ratio is the same as late 2003, but it wasn't exactly low at that time was it?

Furthermore, debt servicing costs relative to income are below their 20-year average because interest rates are at rock bottom and FLS is artificially depressing bank funding costs.

Here's the historical FTB P/E ratio for the UK:

FTB_PE_UK.gif

And here's London:

FTB_PE_London.gif

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I can't decide whether he just thinks everyone is dumb and he can blind us with statistics or whether he's as out-of-touch as Merv and crew were before the credit crunch.

Using all the Bank of England’s tools to secure a sustainable recovery

A recovering banking sector, coupled with persistently low interest rates and new government programmes, may lead to concern that the seeds are being sown for a new cycle in the housing market. The number of mortgage approvals for house purchase is up by 20% on a year ago, while house prices have risen by 5% over the same period – and by more than that in some parts of the country.

That must be kept in perspective, however. Mortgage approvals are currently running at only a little more than half, and transactions a little more than two-thirds, of pre-crisis levels. Households’ debt servicing costs relative to income are below their 20-year average, and houses cost the same relative to earnings as they did in 2003.

Nevertheless, the Bank of England is acutely aware of the risk of unsustainable credit and house price

growth and will be monitoring it closely.

The important thing to recognise is that we now have tools other than interest rates that can be used to contain risks in the property and financial sectors. These so-called macroprudential tools were not available to us before the crisis and we are now fully prepared to deploy them if that were needed. The Bank of England is now in a position, for example, to supervise lending to specific sectors more intensively, to make recommendations to banks and building societies to restrict the terms on which new credit is provided, or even to raise capital requirements on mortgage or other types of lending.

Having these in our toolkit – and if necessary using them – will help us to keep interest rates low to secure recovery without creating risks that make that recovery ultimately unsustainable. If that is not enough, a final safeguard is built into our new forward guidance framework. The Bank’s independent Financial Policy Committee has the task of warning publicly if persistently low interest rates are leading to vulnerabilities that cannot be contained by other means.

In short, we are providing the stimulus the economy needs, but in a disciplined way to secure price and financial stability.

Source: Mark Carney: Speech and Press Conference, held at the East Midlands Conference Centre

Realistically, when you have a central bank more afraid of setting off a debt deflation cycle than they are of CPI, much less RPI which is not their problem, they can tolerate a lot more HPI than we can, so the operative question becomes how much additional risk do they associate with house prices rising beyond present values. They have good data too. They know that it's just a fantasy market, a real Potemkin village. If we see real interest-only lending (i.e. 25 year term IO), high-LTV and self-cert, then the circus is back in town. In the meantime, it's all just BS.

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"The important thing to recognise is that we now have tools other than interest rates that can be used to contain risks in the property and financial sectors. We are now fully prepared to deploy them if that were needed."

The Bank could, he said, use its newer tools to recommend that banks and building societies "restrict the terms on which new credit is provided, or even to raise capital requirements on mortgage or other types of lending".

This would allow the Bank to avoid raising wider interest rates across the economy even as it acted to put the brakes on specific areas. '

Haven't they always had "tools other than interest rates" - if they'd ever wanted to use them.

They've always had the power "to recommend" their use and they would always claim to be "now fully prepared to deploy them if that were needed."

Isn't the reality that there's nothing at all "new" about the so called tools he mentions.

It's just yet another example of the complete and utter lack of credibility of the BoE and now more specifically Carney.

Edited by billybong

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But policy is built not on hope, but on expectation. And we estimate there is only a 1 in 3 chance of unemployment coming down that quickly.”

Most everyone knows their track history on estimates (predictions) and most everyone knows the BoE's record on "expectation" - that he says the policies are built on.

Their record is utterly dismal and that's why the word "unexpected" is one of the most used words in the the BoE's vocabulary.

Edited by billybong

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Most everyone knows their track history on estimates (predictions) and most everyone knows the BoE's record on "expectation" - that he says the policies are built on.

Their record is utterly dismal and that's why the word "unexpected" is one of the most used words in the the BoE's vocabulary.

As far as I'm aware, to date the BoE's sole and desultory explanation for the Great Recession is 'exogenous factors' i.e. something unforseen outside the model.

Keep fiddling with the dials on your bamboo airplane, lads.

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