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Sancho Panza

House Prices Spiral Up In 'virtuous Circle'

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Telegraph 6/9/13

' Property values are rising at their fastest rate for three years and first-time buyers are at a six-year high, new figures reveal, creating a “virtuous circle” which has given banks and building societies more freedom to lend at the current historically low interest rates.

The result is a “contagious” confidence in the housing market, which will have a knock-on effect for the wider economy, according to industry experts.

The latest evidence of Britain’s economic recovery comes days after forecasts for the country’s annual economic growth were doubled from 0.8 to 1.5 per cent.

The Halifax’s latest monthly index recorded an annual rise of 5.4 per cent, taking the price of the average home up from £160,292 to £170,231, the fastest rate of growth since 2010.

Meanwhile figures compiled by LSL Property Services’ First Time Buyer Monitor showed 26,100 first-time buyers took out loans in July, the highest number for six years and a 45 per cent rise on the same month last year.

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The recovery in the property market has also eroded negative equity, giving banks greater confidence to lend. Analysis conducted for The Daily Telegraph shows the value of bad mortgages, where borrowers were unable to keep up with repayments, has fallen 40 per cent since the peak of the financial crisis in 2009.

Accountants UHY Hacker Young, which analysed Bank of England data, found the value of mortgages written off for the year to March was £543m, compared with a peak of £902m five years ago.

Mark Giddens, head of private client services at the firm, said this could help create a “virtuous circle”. He said: “This improvement in the market has meant more homeowners struggling with their mortgages have been able to sell up without having to worry about negative equity. In cases where the worst has happened and homes have been repossessed, an improvement in the housing market means banks are able to achieve better prices on repossessions sales.”

The Government’s efforts to support the property market include last year’s Funding for Lending scheme, which made £80 billion available to banks for loans, the vast majority of which has gone to mortgage lending.

In April ministers launched the Help to Buy scheme, lending 20 per cent of a new-build property’s price, interest-free for five years, for those with only a five per cent deposit.

The scheme will be widened beyond new-build properties in January and will also be available to people moving up the property ladder.

There are, however, critics of the scheme, including the International Monetary Fund, which has warned it could create a new house price bubble.

Buyers have also been warned not to over-stretch themselves, as house prices remain high against average wages and interest rates will eventually rise.

Mr Giddens said: “New borrowers need to ensure that they can afford interest rate rises as current low interest rates won’t be around forever. It is important that the new optimism about the housing market doesn’t lead to a return to the reckless lending of the past.” '

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Htb2 is different from h2b for new properties though. No 20% gift from the government.

HTB2 will involve the government underwriting and element of the loan above 80% ltv with a charge to the lender on the basis that loans are only given to credit worthy appkicants who qualify under normaI lending criteria. I wonder how many people understand this? It will in effect reintroduce 95%mortgages but that won't enable anyone on an average income to buy an average priced house.

Edited by campervanman

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' Property values are rising at their fastest rate for three years and first-time buyers are at a six-year high, new figures reveal, creating a “virtuous circle” which has given banks and building societies more freedom to lend at the current historically low interest rates.'

'Tulip prices are rising at their fastest rate for 3 years and tulip buyers are at a 6 year high, new figures reveal, creating a 'virtuous circle' which has given banks and tulip buying societies more freedom to lend money for tulip purchase on margin, at currently freakishly low interest rates'.

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'Tulip prices are rising at their fastest rate for 3 years and tulip buyers are at a 6 year high, new figures reveal, creating a 'virtuous circle' which has given banks and tulip buying societies more freedom to lend money for tulip purchase on margin, at currently freakishly low interest rates'.

I am increasingly thinking that the recent price rises are down to cash buyers jumping into the market due to (false) perceptions of Htb2. If htb2 used the same 20% free money loan as htb for new builds then I could see the logic of jumping into the market before January. Htb2 will push up prices if the number of qualifying borrowers eligible for loans of 95% ltv outweigh the supply of properties coming onto the market. I'm not sure if this will be the case.

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House prices up, food prices up, energy prices up, wages stagnant. Thank goodness there's no prospect of inflation or we'd be in trouble!

Perhaps we can print some more money to 'help' people pay the higher food and energy prices too :lol:

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House prices up, food prices up, energy prices up, wages stagnant. Thank goodness there's no prospect of inflation or we'd be in trouble!

Perhaps we can print some more money to 'help' people pay the higher food and energy prices too :lol:

All invisible to the Bank of England, as they measure housing costs....low rates and temporary subsidies could lead to a 10% rise but be totally invisible on their spreadsheets.

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House prices up, food prices up, energy prices up, wages stagnant. Thank goodness there's no prospect of inflation or we'd be in trouble!

Perhaps we can print some more money to 'help' people pay the higher food and energy prices too :lol:

Thankfully rents and property sales are still down.

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Unless you're a bank.

If you are a bank and currently you will lend 80k on a house currently valued at 100k because you expect the 100k house to be worth 80k in a few years time, why would you lend more than 95k (80k+15k government underwrite) on the same house in January? The only difference between htb2 and the current situation is that the taxpayers 15% and not 15% of the borrowers deposit is at risk if prices fall. If the borrower defaults then anything less than 80k realised from the forced sale is a loss to the lender as is the case now.

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Property values are rising at their fastest rate for three years and first-time buyers are at a six-year high, new figures reveal, creating a “virtuous circle” which has given banks and building societies more freedom to lend at the current historically low interest rates.

It says something when the idea of ever increasing debt is being punted as "virtuous" - but that's UK 2013.

Tomorrow most likely they'll be banging on about getting the deficit down and people being in trouble with debt.

Edited by billybong

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It says something when the idea of ever increasing debt is being punted as "virtuous" - but that's UK 2013.

Tomorrow most likely they'll be banging on about getting the deficit down and people being in trouble with debt.

Is it 2013, or 2007?

Year begins with a shock for homebuyers as Bank of England unexpectedly rises interest rates to 5.25 per cent. Council of Mortgage Lenders announces repossessions in 2006 hit 17,000, the highest for five years. But there is no stopping the party - for the moment. A dreary, three-bedroom bungalow on the Sandbanks peninsula in Dorset is put on the market for £1.6 million. The Nationwide predicts house prices will rise by 8 per cent in 2007. Savills says 7 per cent, Knight Frank 6, the Halifax 4 and the Royal Institution for Chartered Surveyors 3.

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I do wonder if we're seeing the beginnings of a very long and drawn out bear trap from 2007/2008? Full fundamental recovery and HPC bottom some time in 2025/2030?

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Is it 2013, or 2007?

The use of the word "virtuous" in the context of huge and ever increasing amounts of debt seems to be a first.

The idea of high and increasing house prices being good for the economy is an idea that's been regularly punted.

Indeed there's been the contradiction of calling it a "party" in the past (2007) while at the same time lots of people were being repossessed.

Edited by billybong

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Hal. Someone please do the maths to prove this virtuous circle is ********.

Or is the pound about to be trashed :( ?

Edited by Ash4781

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It was interesting how the description of the location of the speech seemed to dodge about today.

First it was "at a building society" according to the radio - no building society name given.

Then later on the speech had been "in London" according to the radio - indeed it was possible it could have been at a building society in London.

Now it seems to have been at One Commercial Street - apparently a property development in London and most likely to an audience of property developers.

http://

www.itv.com/news/story/2013-09-08/osborne-economy-turning-a-corner/

Cheapest private flat at development is £750,000

The cheapest flat at the development where George Osborne was speaking - One Commercial Street in east London - is a two bedroom property at £750,000.

The location had more zigs and zags than Sir Mervyn's economy.

Edited by billybong

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