Fpc Meeting Today

[R K]

In the central scenario annual house price inflation continues at current levels

until mid- 2015 , following which it slows to a growth rate that is broadly

in line with income from 2016. Income grows near its long-run average of around 4%. By

the second quarter of 2015 total mortgage approvals pick up to

an average level of 270,000 per quarter for the remainder of the scenario period –somewhat below their 1987

-2007 average

JFrom the horses mouth. Growth rate continues for another year, then growth will slow in line with income growth.

i.e. 4% p.a.

.

[Wurzel Of Highbridge]

In the central scenario annual house price inflation continues at current levels

until mid- 2015 , following which it slows to a growth rate that is broadly

in line with income from 2016. Income grows near its long-run average of around 4%. By

the second quarter of 2015 total mortgage approvals pick up to

an average level of 270,000 per quarter for the remainder of the scenario period –somewhat below their 1987

-2007 average

JFrom the horses mouth. Growth rate continues for another year, then growth will slow in line with income growth.

i.e. 4% p.a.

.

If that's annual house price growth relative to wages then they are pricing in a fall as the number would need to go negative for the inflation to become level with wage growth.

[little fish]

Hook, line & sinker. No doubt now as to the priorities.

[R K]

If that's annual house price growth relative to wages then they are pricing in a fall as the number would need to go negative for the inflation to become level with wage growth.

House price growth continues at present rate to mid 2015, thereafter:

Income growth = 4%

house price growth = 4%

Where's the negative house price growth?

Since Carney's targetting banks' books and not individuals, the banks can continue to expand their >4.5 LTIs until they're at 15% of their total book. They can continue expanding their total book in line with wage growth and as they increase lending below that threshold, they can increase lending above the threshold since it's a ratio not an absolute limit. Clever stuff.

Since it exludes remortgages and BTLs the it's clear the banks have quite a lot of leeway. You could argue that outside of London/SE it's a fantastic opportunity for them to increase their books both below the limit, and thus increase their lending above the limit until they hit the limit, then increase them both in line.

As I say, this will run and run in line with wage growth.

Edit: Carney is selling this as an UPPER limit to lending, whereas it's pretty clear that what it's really been designed to be a LOWER limit to mortgage lending to support current price rises for another year, then ensure prices rise in line with wage growth. Got to hand it to him, he's the master of dissembling. Can see why Osborne handpicked him now.

Edited June 26, 2014 by R K

[19 year mortgage 8itch]

Buy a house, get on with your lives.

[Killer Bunny]

Buy a house, get on with your lives. This market will run for another 10 years.

Yeah, there's no such thing as a global economy is there?

[JPJPJP]

trying to interfere with a market

it can work, for a while, but eventually, market forces will take it all back

[zugzwang]

House price growth continues at present rate to mid 2015, thereafter:

Income growth = 4%

house price growth = 4%

Where's the negative house price growth?

Since Carney's targetting banks' books and not individuals, the banks can continue to expand their >4.5 LTIs until they're at 15% of their total book. They can continue expanding their total book in line with wage growth and as they increase lending below that threshold, they can increase lending above the threshold since it's a ratio not an absolute limit. Clever stuff.

Since it exludes remortgages and BTLs the it's clear the banks have quite a lot of leeway. You could argue that outside of London/SE it's a fantastic opportunity for them to increase their books both below the limit, and thus increase their lending above the limit until they hit the limit, then increase them both in line.

As I say, this will run and run in line with wage growth.

Edit: Carney is selling this as an UPPER limit to lending, whereas it's pretty clear that what it's really been designed to be a LOWER limit to mortgage lending to support current price rises for another year, then ensure prices rise in line with wage growth. Got to hand it to him, he's the master of dissembling. Can see why Osborne handpicked him now.

But the putative income growth is entirely dependent on lending growth! The cart is being put before the horse yet again i.e. bubble jobs and bubble wages in finance and construction just like Brown and no more sustainable. Carney is as big a fool as Mervo the Clown.

Edited June 26, 2014 by zugzwang

[zugzwang]

Edited June 26, 2014 by zugzwang

[TheCountOfNowhere]

Mass protests hehe, I like you your funny.

You force up food and fuel price by another 10% through money printing and see what happens.

Edited June 26, 2014 by TheCountOfNowhere

[TheCountOfNowhere]

In the central scenario annual house price inflation continues at current levels

until mid- 2015 , following which it slows to a growth rate that is broadly

in line with income from 2016. Income grows near its long-run average of around 4%. By

You mean...the bankers want to get house prices to the 2007 levels all over the country where their balance sheets are in the black.

Then keep prices going up for ever in a sustainable manner so they were never bankrupt.

Ahhhh, to live in an ivory tower.

Edited June 26, 2014 by TheCountOfNowhere

[R K]

But the putative income growth is entirely dependent on lending growth! The cart is being put before the horse yet again i.e. bubble jobs and bubble wages in finance and construction just like Brown and no more sustainable. Carney is as big a fool as Mervo the Clown.

Hence why they want/need to keep nominal lending expanding. Nothing surprising in that.

[R K]

You mean...the bankers want to get house prices to the 2007 levels all over the country where their balance sheets are in the black.

Then keep prices going up for ever in a sustainable manner so they were never bankrupt.

That's what's been happening and the BoE will continue to ensure happens, yes.

Think of it as the Carney Housing Put if you will.

Edited June 26, 2014 by R K

[spyguy]

But the putative income growth is entirely dependent on lending growth! The cart is being put before the horse yet again i.e. bubble jobs and bubble wages in finance and construction just like Brown and no more sustainable. Carney is as big a fool as Mervo the Clown.

There are some good posts on FTAV today.

One post has a very good reply, which I copied as it not sourced from the FT:

London Gets a Monetary Policy

http://ftalphaville.ft.com/2014/06/26/1887622/london-gets-a-monetary-policy/

Jack Grahl | June 26 11:06am |

The problem with just asking banks to 'pretend' that rates have risen, rather than actually putting up rates, is that it only affects those people who are constrained to buying using residential mortgages. In other words, people who work and pay tax in the UK and who want to buy a house there in order to live in it. Anyone who can speculate on London housing using other sources of funds is free to continue doing so.

Putting up interest rates would dampen the ardor or all of these people. Unfortunately it might also reveal UK economic growth to be a house of cards based on hidden underemployment and misplaced consumer confidence (much of it from those people whose houses in London have gone up 19% in the last year).

I also read a good comment about macroprence vs. raising IRs:

Banks will find a way to game macro-prudence rules, fracturing and distorting the market.

Raising IRs manages will always manage to get in all the finacial cracks.

[R K]

Yeah, there's no such thing as a global economy is there?

Sure, barring an exogenous shock.

We had one of those in 2008 and it was a buying opportunity no?

[Ash4781]

In the central scenario annual house price inflation continues at current levels

until mid- 2015 , following which it slows to a growth rate that is broadly

in line with income from 2016. Income grows near its long-run average of around 4%. By

the second quarter of 2015 total mortgage approvals pick up to

an average level of 270,000 per quarter for the remainder of the scenario period somewhat below their 1987

-2007 average

JFrom the horses mouth. Growth rate continues for another year, then growth will slow in line with income growth.

i.e. 4% p.a.

.

Will they be able to keep rates at 3% or materially lower than in the past in that scenario? What is the market reaction rates going above 3%?

[winkie]

...asset rich, debt and income poor.

[cuddlybear]

Buy a house, get on with your lives. This market will run for another 10 years.

Hi RK

Always interested by your posts

Just curious as I know you have said elsewhere that London is a bubble and elsewhere UK housing is overpriced but not as much so

So how do you see this panning out? Broad increases in line with the famous 18-year cycle through to 2025, another bubble top and downturn... but with the crucial difference there probably isn't the same wiggleroom on interest rates etc to cushion the downturn?

How do you see the London bubble pop (if any) fitting into this?

[Killer Bunny]

Carney is as big a fool as Mervo the Clown.

The serious issue is NONE of them are fools.

[gf3]

FT video http://video.ft.com/3643559571001/BoE-to-the-rescue-/editorschoice

[andygivenup]

You force up food and fuel price by another 10% through money printing and see what happens.

Food and fuel will be consumed less by 10%, no protests. There is no one with the will to protest in large enough numbers.

Mindless thugs rioting in City centres like a couple of years ago maybe. But nothing else.

And I have been told by a policeman in Mcr, that next time they will be ready for them.

[winkie]

The most dangerous objectors are the silent objectors, they protest with their actions by voting/buying/acting with their feet......actions speak louder than words or visible angry outbursts...

[Venger]

But the putative income growth is entirely dependent on lending growth! The cart is being put before the horse yet again i.e. bubble jobs and bubble wages in finance and construction just like Brown and no more sustainable. Carney is as big a fool as Mervo the Clown.

There's 2 sides to the lending equation. None of the credit-worthy non-owners I know of, resistance leaders, want to borrow to meet current painfully dizzy scary sick high asking prices. Wage inflation would need to rocket for them to want to buy. And even then it would just bring about more mid-higher end older owners trying to compete against buyers for BTL.

On the other-side we had a HPC high earner turned down on mortgage application last week.

And Central Bankers; you have to look for the real meaning in what they say, even if some VI's are getting carried away on Carney's words, with thoughts of future HPI, on top of already "cheap" house prices we have today.

*Rightmove Index June 2014

Shipside notes: “Many serious buyers who were waiting in the wings have now bought and moved in, taking a slug out of the

pent-up demand for a few years to come, and the consequent chatter on the street is that quality buyers are now thinner on

the ground. The next wave of buyers may have less motivation or ability to buy and sellers are going to have to be sensitive to

their local market and not pitch their asking prices too high as choosy buyers will not arrange to come and visit.”

The Mortgage Market Review, which came into force in April and put more demands on bank to ensure customers can repay loans, has appears to have tightened up lending. While some of the traditional high street lenders, such as Lloyds, have been using interest rate stress testing for the last six months, the MMR guildelines have now been adopted more broadly across all lenders with anecdotal evidence showing that some credit-worthy freelancers, self-employed people and those with a commission-based income, are now struggling to get a mortgage.

As for the government intervention on house buying, listen not to what the mouth says, but watch what the hands do.

[Bruce Banner]

The most dangerous objectors are the silent objectors, they protest with their actions by voting/buying/acting with their feet......actions speak louder than words or visible angry outbursts...

My solution is to not buy a house, spend my money abroad, and vote UKIP.

[R K]

Reservoir Dogs.

Which one's Mr Brown?

Edited June 26, 2014 by R K