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GloomMonger

Banks To Be Tested On 35% House Price Slump ----- Merged

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Very interesting bear food.

http://news.sky.com/story/1250824/banks-to-be-tested-on-35-percent-house-price-slump

Britain's biggest banks and building societies could be forced to raise billions of pounds of fresh capital unless they can demonstrate their ability to withstand a house price slump of roughly 35%.

Sky News has learnt that stress tests to be carried out by an arm of the Bank of England later this year will also assess their readiness to cope with a sudden spike in interest rates to more than 5%.

Are we being warned of a crash!!

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will the government loans be tested with the same criteria?

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Hilarious a spike in interest rates at 5%. 15% was a fecking spike, 5% is back to normality. Just shows how the language has changed the new economic normality is clearly uber low rates.

So the BoE will take one look at what happens if rates hit 5% and will conclude it has to keep ememergy interest rate measures in place for a slightly longer period than anticipated.

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Very interesting bear food.

http://news.sky.com/story/1250824/banks-to-be-tested-on-35-percent-house-price-slump

Are we being warned of a crash!!

They want people to believe rates are to rise. Maybe they will but if they do unlikely sustainable. Just as Japan's experience for many years.

As with all these stress tests of banks it'll be a sham. Just like Clifford Chance saying RBS did nothing wrong...

Edited by Killer Bunny

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Strange how this comes out timed impeccably with Mr Clifford's reported conviction.

Wonder if the BBC will mention this incredibly important financial news -

or will it sp**k it's load on a Brass Eye-esque peado-geddon fest.

A good day to bury bad news ay?

I'll be watching very carefully.

Ames

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Hilarious a spike in interest rates at 5%. 15% was a fecking spike, 5% is back to normality. Just shows how the language has changed the new economic normality is clearly uber low rates.

So the BoE will take one look at what happens if rates hit 5% and will conclude it has to keep ememergy interest rate measures in place for a slightly longer period than anticipated.

The national debt is £1.4trn, you want to roll that over at 5%? Never going to happen. The debt interest would be £150bn/yr by 2017. The most we can hope for is an 0.25% uptick this side of the GE and then back to 0.5% and QE3.

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Unimportant and not bear food. Tests like these have been going on for a number of years. Any competent bank should be doing them for themselves anyway.

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Will 'they' allow house prices to slide before the next General Election?

It would not be a bad thing and would get them more votes, votes from hard working people, looking to move up or looking to buy.....houses don't have to slide much, just so that the last similar house in the street sells for a bit less than the last, any recent buyers would just have to stick with it, pay it down a bit and their next home will be cheaper for them to buy.....stamp duty and moving costs see to it that you can't sell to buy every year........also low interest rates mean more capital can be repaid faster......the only ones who would not welcome lower prices are the multi home owners/debtors, who cares about them. ;)

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Strange how this comes out timed impeccably with Mr Clifford's reported conviction.

Ames

indeed.

any more important stuff that needs highlighting?...justin bieber been caught cottaging or something?

should have added..that sort of cottaging has nothing to do with house-hunting in somerset.

Edited by oracle

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Yes please.

35% off (the type of houses I'm only interested in buying) would bring them right into my 'borrowing comfort zone'.

Edit to add, it's not exactly armaggedon though, is it?

35% from here, to me is somewhere around 'value', anything much over this would be an overshoot, imo.

Edited by Reck B

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Will 'they' allow house prices to slide before the next General Election?

I doubt it, but they miscalculated the effect of Funding for Lending and Help to Buy on people who wanted to believe that house prices can only go up and are now stuck between a rock and a hard place.

If they keep inflating the bubble, they won't be looking at the 35% "slump" that was already on the cards. The bigger the bubble, the louder it will pop and if they keep up the stimulus until after the election we could be looking at a 50% slump, like in Northern Ireland.

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The national debt is £1.4trn, you want to roll that over at 5%? Never going to happen. The debt interest would be £150bn/yr by 2017. The most we can hope for is an 0.25% uptick this side of the GE and then back to 0.5% and QE3.

is that the excluding the temporary inteventions number? I supose with a 35% crash would require much more temporary intervention and would keep the 1.4tn growing at the current rate Osbourne is managing. If there is no more and the lenders have to raise capital privately sounds expensive so higher funding rates?

(Edited)

Edited by Ash4781

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Any competent bank should be doing them for themselves anyway.

Competence in banking is quite a novel idea- but not really required- all they need do is game the system as usual while creating the impression that they are sticking to the letter of the rules- it's what they have been doing for decades and they have no real incentive to stop- after all if their loans should turn ugly as in the past the taxpayer will be on hand to bail them out- and even if the banks crash and burn the bonus's will have long since been paid out and moved to a safe location away from any possible clawbacks- if indeed any are even being proposed.

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Unimportant and not bear food. Tests like these have been going on for a number of years. Any competent bank should be doing them for themselves anyway.

Bear food in as much as it puts into the collective psyche the possibility of property prices falling not simply going UP UP AND AWAY!

Presumably any competent person should also be stress testing their relationship, their work, their life etc with a 35% + fall in their HTB property bought with a 100% loan spread between the government and the bank/building society and a mortgage at 7%.

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It would not be a bad thing and would get them more votes, votes from hard working people, looking to move up or looking to buy.....houses don't have to slide much, just so that the last similar house in the street sells for a bit less than the last, any recent buyers would just have to stick with it, pay it down a bit and their next home will be cheaper for them to buy.....stamp duty and moving costs see to it that you can't sell to buy every year........also low interest rates mean more capital can be repaid faster......the only ones who would not welcome lower prices are the multi home owners/debtors, who cares about them. ;)

Comment I've just read on a Moneyweek (Dec 2013) story: Two thirds of John Major’s house price crash took place between 1989 and 1992. He was re-elected in 1992.

Heard lots of stories from homeowners that late 80s+ hpc was excellent for them. There's way too many older people hogging 3+ bed homes around here, and when they do pass on, sickening that inheritors get so much for them at sale (low supply - frenzied demand), although many rent them out as the expect even more hpi.

Actually that Moneyweek article is worth reading: http://moneyweek.com/merryns-blog/what-sir-isaac-newton-can-teach-us-about-londons-ludicrous-property-price-bubble/

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A 35% fall reverses the effects of a 50% rise. Where I am, that would be a reversal to approximately 2005 values. In other parts of the country it would be far earlier.

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The national debt is £1.4trn, you want to roll that over at 5%? Never going to happen. The debt interest would be £150bn/yr by 2017. The most we can hope for is an 0.25% uptick this side of the GE and then back to 0.5% and QE3.

Pretty soon we'll need to be printing money just to pay the interest on the debt.... Still at least George has fixed the economy.

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I can't imagine that we'll ever know officially if any of the banks have failed the stress test - the last time we were told by ministers not to worry about a specific bank, it caused an instant run on Northern Rock!

I would also have thought that if prices do actually fall by 35%, we will just be informed that 'nobody could have forseen this drop, we are in a crisis, and so we all need to share the pain...' - and with that, savings will be plundered with a massive 'bail-in' from the 'fat-cats' with savings to help out 'hard working families'...

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