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'risk Of Debt Peril' When Interest Rates Rise


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HOLA441
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HOLA442
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HOLA443
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HOLA444
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HOLA445
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HOLA446

Theres probably upwards of 15 million homeowners in this country if you consider joint owners, millions more hanging on for the likelihood of an inheritance. Then there's 1.5 - 2 million people whose raison d'etre is to enslave the poor to make themselves rich by renting out property.

How badly do you need to affect how many people before the madness ends?

How many years are we in now and no matter how many chances you give people to climb back in from the ledge, these people are moving further away.

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HOLA447

1406190937030_wps_3_Picture_Device_Indep

An alarming graph base rate at 0.5% and still nearly 20% of mortgage holders have a problem, since about 2005 onwards this number has increased. Before we had an "economic problem" there clearly was a major fecking problem in the system and the idiots pumped it up even higher!

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HOLA448

1406190937030_wps_3_Picture_Device_Indep

An alarming graph base rate at 0.5% and still nearly 20% of mortgage holders have a problem, since about 2005 onwards this number has increased. Before we had an "economic problem" there clearly was a major fecking problem in the system and the idiots pumped it up even higher!

Great chart. ^_^

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HOLA449
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HOLA4410

1406190937030_wps_3_Picture_Device_Indep

An alarming graph base rate at 0.5% and still nearly 20% of mortgage holders have a problem, since about 2005 onwards this number has increased. Before we had an "economic problem" there clearly was a major fecking problem in the system and the idiots pumped it up even higher!

Mental.

In 1991 it was high rates causing difficulties. At least they had a control lever to drop rates when possible.

Now the difficulty is massive mortgages and dwindling disposable income, caused by increasing living costs, caused by PRINTING BILLIONS OF POUNDS.

And no control lever.

Should have took the pain in 2007.

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HOLA4411

Mental.

In 1991 it was high rates causing difficulties. At least they had a control lever to drop rates when possible.

Now the difficulty is massive mortgages and dwindling disposable income, caused by increasing living costs, caused by PRINTING BILLIONS OF POUNDS.

And no control lever.

Should have took the pain in 2007.

We have a lever now, it will be negative borrowing rates. People will be able to have a mortgage and have some of the principle paid off by the bank..... It seems the only logical way to keep house prices going up.

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HOLA4412
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HOLA4413

Not to worry, Janet Yellen and Mario Draghi have done a sectoral analysis of their respective economies and assure us there are no widespread asset bubbles though some markets might be a little 'frothy'. No-one's better qualified to determine the price of everything than a central banker. Just like Alan Greenspan in 2005, when he declared there was no housing bubble but he could see some signs of froth.

Edited by zugzwang
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HOLA4414
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HOLA4415

It always seems strange to me that a centrally planned "interest rate" is so critical to the economy. If we're going to have such central planning, why not cut out the middle man altogether and just have the BOE do mortgages?

Sorry, this should be filed under "Don't Give Them Ideas!".

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HOLA4416
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HOLA4417

http://www.resolutionfoundation.org/us/about/

So this is from The Resolution Foundation. Seems to have been setup by a Clive Cowdry Who is massive in insurance and financial services sector. I can't really speculate really as could be some kind of philanthropic endeavour as the mission statement or maybe not.... ;)

Edited by Ash4781
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HOLA4418

It always seems strange to me that a centrally planned "interest rate" is so critical to the economy. If we're going to have such central planning, why not cut out the middle man altogether and just have the BOE do mortgages?

Sorry, this should be filed under "Don't Give Them Ideas!".

I've felt for some time this could be the next logical step for the banks to offload mortgages directly to the BoE. Historically I seem to recall the BoE did have local branches in the past.

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HOLA4419

Resolution Foundation
25 Sackville Street,

London

won the 2013 Think Tank of the Year award from

Prospect Magazine
25 Sackville Street
London

(addresses from their web sites)

There seems to be some connection (even if only informal) because from their web sites in 2013 they both also seem to have been at the same address then (23 Savile Row, London).

Edited by billybong
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HOLA4420
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HOLA4421

Oh come off it. We are not talking about the second world war or the black bloody death here. We are talking about a small increase in interest rates, to bring them up from stupidly, insanely low. I promise you, if interest rates increase a couple of percent the world will not end. The stock market might cool off a bit, a few people might go bust because they took out reckless loans. Big deal.

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HOLA4422

I looked up the Res Foundation guy on that page. He also has a blog out from yesterday, about the situation for the victims. Got to save them for if they sell for lower prices, other house prices will fall in value.

It's amusing there are 4 house price protection lobby groups on the 1st page of this part of the forum, it seems to me, all giving it the 'what about the victim home-owner' routine. 4 if I include MAS. (The Money Advice Service has claimed that 8.8 million adults have too much debt.). Where were they 2001-2007 during the HPI celebration? Prices turn down, or at risk of turning down, and they come out hard. Even when had 30% more HPI since 2007 in my area, in London and parts of the SE.

Once interest rates start rising, how can indebted households be helped through the painful transition?

24 July 2014

To appreciate the extraordinary period we have lived through, consider that a household with a mortgage of £75k has received a cumulative ‘windfall’ of around £12.5k in the years since the crisis, relative to the cost of servicing the same mortgage before 2008 (double that for a mortgage of £150k).That’s a very big gain and - for many homeowners, as opposed to renters, has compensated for the squeeze in real incomes. Looking to the future, if interest rates rise in line with expectations, to around 3 per cent by 2018, and typical mortgage rates go up as a result by say 1.5 per cent (some might think this optimistic), it adds £1.5k to the annual costs of a £150k mortgage. If you assume sharper rate rises the figures get truly scary.

All of which would, you’d think, help focus minds.

Yet I haven’t heard a single politician talk about the issue and what, if anything, might be done to prepare for it. That the next parliament will be overshadowed by prolonged, if largely unspecified, fiscal austerity is now a ubiquitous point. That it could also be shaped by steady monetary tightening rarely gets explored.

Given that this trajectory is near-inevitable, even if the pace and scale of rate increases are still up for grabs, how might policy-makers help cushion the burden of adjustment for debt-soaked households?

It’s a vexed question as there are two potentially contradictory goals: prevent a future credit-fuelled boom while at the same time carefully defusing the economic and social problems caused by the last one. (Think of it as avoiding a hair of the dog recovery while nursing those suffering an almighty hangover back to full health). Both are vital: but take the wrong approach on the former and you take risks with the latter.

in full: http://www.resolutionfoundation.org/blog/2014/jul/24/once-interest-rates-start-rising-how-can-indebted-/

There was an interesting piece in the Sunday Times (20.07.14) that those taking two year fixes now leave themselves exposed, if lending rates were to rise as some anticipate - which I find difficult to see. I was going to post some of it up earlier, but I'm too accustomed to rates staying low, to help the victims, and struggle to see such rises (Capital Economics 5 year forecasting champions). The math though, is obvious. Read a few people on HPC saying 2 year fixes are the way people are buying now and setting high prices as rates so much lower, but like everything, they can claim victimhood later if rates were to rise. If. We've just spent 5 years bailing out the victims..... although I'd like to see those recently buying at crazy prices, on super-tease low 2-year fixes (high LTVs) get hard shock.

Sunday Times (20.07.14)

...More than three new borrowers in four are choosing to fix mortgages ahead of rate rises - and two-year fixes are most attractive, with the best deals below 2%. However, anyone choosing to fix for two years risks coming unstuck once they need to remortgage.

Research by the mortgage broker London & County (L&C) sows that somone choosing a best-buy two-year fix now will find themselves having to pay nearly £850 more a year on a £200,000 loan in two-years time. If they choose another two-year fix, they will end up paying £3,061 a year more than when they started. Choosing a five-year fix avaoids such a repayment shock.

..The calculations use an interest rate forecast produced by the consultancy Capital Economics, which has the best track record for predicting interest rate over the past five years. It expects the Bank rate to rise in February 2015 to 0.75%, reaching 1% next August, 1.25% February 2016 and 1.75% in January 2017. It will then rise gradually to 2.5% by the end of that year and 3.5% by October 2018. This prediction is relatively conservative; money markets are expecting a rate rise by the end of this year. If rates rise earlier and faster, borrowers could face an even bigger payments shock.

..Unlike five-year deals, two-year fixes have largely been immune from expectations of rate rises and remain very cheap - as low as 1.58% from West Bromwich building society.

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HOLA4423

Oh come off it. We are not talking about the second world war or the black bloody death here. We are talking about a small increase in interest rates, to bring them up from stupidly, insanely low. I promise you, if interest rates increase a couple of percent the world will not end. The stock market might cool off a bit, a few people might go bust because they took out reckless loans. Big deal.

And yet with uber low rates the economy is already very sluggish....

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HOLA4424

And yet with uber low rates the economy is already very sluggish....

Many businesses and market participants are holding back, precisely from the uncertainty of policies to save the victims, not knowing what their position will be...Govs and CBs on debt-ceiling worries, QE, taper, base rate rises. Same for many of us on hpc. These low rates are not a miracle for everyone to go out spending and boosing economy, when some of us also have buying a house at less stupid price in mind.

2011: (WSJ)

Those with the capacity to hire American workers―small businesses as well as large, publicly traded or private―are immobilized.

Not because they lack entrepreneurial zeal or do not wish to grow; not because they can't access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy. In an environment where they are already uncertain of potential growth in demand for their goods and services and have yet to see a significant pickup in top-line revenue, there is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decisionmakers frozen in their tracks.

Edited by Venger
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HOLA4425

Many businesses and market participants are holding back, precisely from the uncertainty of policies to save the victims, not knowing what their position will be...Govs and CBs on debt-ceiling worries, QE, taper, base rate rises. Same for many of us on hpc. These low rates are not a miracle for everyone to go out spending and boosing economy, when some of us also have buying a house at less stupid price in mind.

Yup.

Kremlinology is what the "market" is about now.

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