What Will T P T B Do To Sustain House Prices?

[Liquid Goldfish]

After the latest bout of insanity I just can't see any government letting house prices crash when IRs rise without attempting something pretty drastic to try to stop it.

I think they'll bring back something like MIRAS. It ticks all the boxes - it helps "homeowners" - and it can be spun as another tax break for hard working families.

I worked out MIRAS would cost about £12 billion a year. I can easily imagine the Daily Mail supporting a campaign to stop Foreign Aid and use it instead to support British homeowners.

My maths FWIW : There's £1.2 trillion of mortgage debt. If IRs rise to 5% on average that's £60 billion a year in interest. And tax relief at 20% on £60 billion is £12 billion.

Edited February 13, 2014 by oldsport

[Harry Monk]

I think when interest rates move up, as they inevitably will, then it's "Game Over", nothing will stop a collapse in prices. I'm sure that in their heart of hearts, the LibCons know that they might just be able to keep the plates spinning until the GE, but no longer.

[zugzwang]

I think when interest rates move up, as they inevitably will, then it's "Game Over", nothing will stop a collapse in prices. I'm sure that in their heart of hearts, the LibCons know that they might just be able to keep the plates spinning until the GE, but no longer.

I don't think it's inevitable that base rates will move up, at least not until the UK has been through a default/hyperinflation - rising gilt yields alone could be sufficient to collapse the UK economy again. OTH Osborne is the least trustworthy Chancellor I can ever remember, likely to stop at nothing in his efforts to get re-elected.

[SarahBell]

No interest ratE rises for at least a year by which time the country will be more suckered into mortgage debt (humans and govt owned banks) so even less chance of rate rises then.

[Killer Bunny]

Oh you guys!

There won't be rate rises for years. Maybe decades.

Well certainly for a few years. We'll see if we're #TurningJapanese in due course

[zugzwang]

Oh you guys!

There won't be rate rises for years. Maybe decades.

Well certainly for a few years. We'll see if we're #TurningJapanese in due course

But what are the Japanese turning into?

[MartinE]

TPTB - allow portion of Uk to become independent.

During the hullabaloo more money printing will go unnoticed.

[Ah-so]

But what are the Japanese turning into?

A land of affordable property!

[Guest spp]

There are 1.3 trillion reasons why interest rates are so low...

[Monkey]

I think outside forces will put pressure on our ecconomy. It could br anything. China blowing up etc. But a hpc will be before a major rate rise.

There could be a small rate rise 0.25% a month before the GE, depending on if labour are ahead in the polls or not

[Eddie_George]

I think when interest rates move up, as they inevitably will, then it's "Game Over", nothing will stop a collapse in prices. I'm sure that in their heart of hearts, the LibCons know that they might just be able to keep the plates spinning until the GE, but no longer.

Yeah, not even the USA could stop prices falling. What can we do with an economy that's based almost entirely on lending to buy houses?

They'll have a choice between saving the pound or saving the housing market.

[1929crash]

They will take out Martin Lewis.

[Harry Monk]

Oh you guys!

There won't be rate rises for years. Maybe decades.

Well certainly for a few years. We'll see if we're #TurningJapanese in due course

No disrespect, but didn't you say for many years that house prices would have fallen 50% by 2014?

[(Blizzard)]

After the latest bout of insanity I just can't see any government letting house prices crash when IRs rise without attempting something pretty drastic to try to stop it.

I think they'll bring back something like MIRAS. It ticks all the boxes - it helps "homeowners" - and it can be spun as another tax break for hard working families.

I worked out MIRAS would cost about £12 billion a year. I can easily imagine the Daily Mail supporting a campaign to stop Foreign Aid and use it instead to support British homeowners.

My maths FWIW : There's £1.2 trillion of mortgage debt. If IRs rise to 5% on average that's £60 billion a year in interest. And tax relief at 20% on £60 billion is £12 billion.

The housing crisis is not an economic crisis as much as a political one.

I don't like to make predictions, but I do think the resolution, for better or worse, is likely to be political.

So rate rises may not be the issue, and 'what they do' depends upon what the public will allow them to do. Ultimately, keeping house prices high is very easy as long as no one stops them.

I think it could go one of two ways. Hopefully, the increasing political power of the jilted generations will simply change the nation's attitude to landlordism and the feudal system, and the government will be forced to change. This is possible, particularly as more and more MPs, journalists and people with power (hell, even estate agents and bankers) are simply priced-out of the economy.

However, it's just as likely that the increasingly indoctrinated population will simply accept a slowly decreasing quality of life, whilst being told that the economy is growing, blaming it on themselves and 'market forces', but thoroughly convinced that those same 'market forces' are unavoidable.

This is basically what happened during the 'boom' years, during which lots of people got a lot poorer in real terms. There is a growing disconnect between paper wealth and real wealth, and between 'the economy' as discussed and measured by politicians,and 'the economy' as experienced by most people.

This hasn't lead to a backlash, in fact it is supported by many of the losers, who focused on paper wealth, relative wealth and short-term wealth. Any nagging doubts they might have are blamed on immigration, benefits or Europe (all of which may, or may not, be a problem but they sure as hell aren't the problem).

Anyway, I think either scenario is plausible, and it's anyone's guess what will actually happen.

Edited February 13, 2014 by (Blizzard)

[The Masked Tulip]

FWIIW, Max Keiser's prog today is about the madness of Oz and UK house prices.

[long time lurking]

I think it could go one of two ways. Hopefully, the increasing political power of the jilted generations will simply change the nation's attitude to landlordism and the feudal system, and the government will be forced to change.

This ,the have nots are reaching the age demographic which the politicians need to pander to for their votes ,but i think we are a few years away from that ,on the other hand HPI is slowly being seen as a bad thing by a much larger percentage of the population even those that have gained from HPI can now see there`s very little hope for their now late teenage children

[rantnrave]

Hopefully, the increasing political power of the jilted generations will simply change the nation's attitude to landlordism and the feudal system, and the government will be forced to change. This is possible, particularly as more and more MPs, journalists and people with power (hell, even estate agents and bankers) are simply priced-out of the economy.

Unless you can sign them up for the Ponzi asap. Enter HTB...

[long time lurking]

Unless you can sign them up for the Ponzi asap. Enter HTB...

Yep but isn't that a sticking plaster with a five year life span ,by feck it`s going to hurt when it`s removed

[rantnrave]

Yep but isn't that a sticking plaster with a five year life span ,by feck it`s going to hurt when it`s removed

Enter HTB mark III...

We are going to need circumstances from outside the UK to rescue us from our own property-bubble madness.

[Quicken]

This ,the have nots are reaching the age demographic which the politicians need to pander to for their votes ,but i think we are a few years away from that ,on the other hand HPI is slowly being seen as a bad thing by a much larger percentage of the population even those that have gained from HPI can now see there`s very little hope for their now late teenage children

Try late teenage to 40+ year old children.

[Maynardgravy]

Portillo on last night saying to Andrew Neil that it as obvious that base rates were going to have to rise - after the election of course. But rise they will.

[DTMark]

Portillo on last night saying to Andrew Neil that it as obvious that base rates were going to have to rise - after the election of course. But rise they will.

I see all out currency collapse as the more likely outcome.

Having watched these debates over the last decade, I still can't see why the BoE would raise the base rate.

It's a currency war and we're in no position to win it - the economy is too "fragile" (read as: completely f***ed) to tolerate any increased borrowing costs without destroying the electoral chances of whichever party is in power. That being more important than any long term economic health, and thus explaining the course of action taken so far.

We don't need to borrow any money anyway. We can just print some more. There is no need to reduce the size of the State. We can just print some more money.

And so on.

I suppose it's possible that the Banks themselves might look to push up mortgage rates, that being disconnected from the BoE base rate, but then the government can just... print some more money and give it to the mortgagees to offset the increase in their payments, surely. Help to Buy Mk2. Then Mk3. And so on.

In the end - all out currency collapse.

[Maynardgravy]

I see all out currency collapse as the more likely outcome.

Having watched these debates over the last decade, I still can't see why the BoE would raise the base rate.

It's a currency war and we're in no position to win it - the economy is too "fragile" (read as: completely f***ed) to tolerate any increased borrowing costs without destroying the electoral chances of whichever party is in power. That being more important than any long term economic health, and thus explaining the course of action taken so far.

We don't need to borrow any money anyway. We can just print some more. There is no need to reduce the size of the State. We can just print some more money.

And so on.

I suppose it's possible that the Banks themselves might look to push up mortgage rates, that being disconnected from the BoE base rate, but then the government can just... print some more money and give it to the mortgagees to offset the increase in their payments, surely. Help to Buy Mk2. Then Mk3. And so on.

In the end - all out currency collapse.

Then the cost of living spirals out of control (as it already is). Hardly a vote winner in itself.

[zugzwang]

Then the cost of living spirals out of control (as it already is). Hardly a vote winner in itself.

See Japan.

Edited February 14, 2014 by zugzwang

[DTMark]

Then the cost of living spirals out of control (as it already is). Hardly a vote winner in itself.

But, it is. That's the problem. If people actually saw a piece on the news about inflation and stopped to think "Why is there inflation?" or actually thought that this might count as some form of tax, or were to ask a question such as "how much money do we need to have in our economy at any one time" then as a species we'd be a lot closer to seeing how all this works and you might even get some input from the "man in the street" and some discontent.

Sadly, although the "crisis" has brought a lot of people a lot nearer to understanding the deception involved in "flexible currencies" they're still just a bunch of proverbial crackpots, this understanding is still a long way from being mainstream.

If we get to a loaf of bread costing say £4 then the natives might get a little restless. There are also those infernal old people who need to heat their homes and who vote, so we'll need to syphon some printed money their way too.

There was absolute outrage at one point with fuel prices, but now we just make that "tch" sound with our tongue and the top of our mouths.

And anyway, this isn't an issue for debate because inflation is low because the government says so.

One of the reasons we won't have a referendum on Europe is because we'll be joining the Euro or its replacement when the above programme has run its course.

See Japan.

What is a "BBL"?