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Dave Beans

Housing Market Could Face Collapse If Base Rate Rise Hits Buyer Confidence

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Isn't it strange how the media have gone bearish all of a sudden. Some strings have been pulled somewhere - but I did expect the Guardian, critical of the Tories at any cost, to be above it. Saying that don't GMG have some investments in property portals? I seem to remember reading a while ago how they owned a few businesses engaged in HPI.

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We are past the election.

HPI in it's current cannot be allowed to run forever, it is already approaching the levels of unaffordability.... It will be halted, even reversed until they can bring earnings (and greater affordability) into some sort of parallel.

Government sentiment has changed journalists are not stupid they can read that and the way the wind is blowing.

Maybe once we come out of the other side of this reset and things start to grow again growth across the nation including London will be in the low single digits which is where I am sure the Tories would prefer (even love) it to be.

They profess to be the party of stability in the economy, low levels of growth with an affordable framework would suit them right down to the ground. Equal opportunities for all and the rug pulled from under the feet of the spiv get rich quick property speculators who distort the market.

Edited by geezer466

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We are past the election.

HPI in it's current cannot be allowed to run forever, it is already approaching the levels of unaffordability.... It will be halted, even reversed until they can bring earnings (and greater affordability) into some sort of parallel.

Government sentiment has changed journalists are not stupid they can read that and the way the wind is blowing.

Maybe once we come out of the other side of this reset and things start to grow again growth across the nation including London will be in the low single digits which is where I am sure the Tories would prefer (even love) it to be.

They profess to be the party of stability in the economy, low levels of growth with an affordable framework would suit them right down to the ground. Equal opportunities for all and the rug pulled from under the feet of the spiv get rich quick property speculators who distort the market.

Or they'll just introduce 'double help to buy' or something.

Their own figures forecast a vast increase in private debt up to 2020...

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Is there really any meaningful link between the BoE rate and what the banks charge punters?

If I understand fractional reserve correctly, if I borrow 100k, that money is created out of thin air at zero cost.

To keep the regulators happy the bank then has to find about 3k of assets. Say they pay 5% for those assets, that's still 5% of 3% or 0.15% of the loan...

I can see how the base rate affects the publics perception of what a reasonable mortgage rate should be, but if my maths is correct, they could offer loans below the base rate quite profitably!

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I liked this from the Comments section:

=================================================================================

I agree that you could teach the easy stuff, and indeed that is planned for the school curriculum. how would you teach anything meaningful (about money) without causing a revolution? For example how would you teach...

Our fiat monetary system... would you tell people that in the last 1000 years no fiat monetary system history has ever lasted very long?

The creation of money... Would you tell them that in a fiat money system banks create the majority of money and so impose what is effectively a tax on the minions for their entire lives.. when banks fail (not if) we protect them.

Retirement... Would you tell them that for every £5K of income they will need about 100K of savings? and would you tell them that the average pension pot in the UK is about £35K... would they ever have an illusion of a secure retirement after that?

Financial fairness... Would you tell them that economists, politicians and academics all unanimously agree that the bill of the financial crisis has been passed to the next generation? 'class, your grandparents banks pumped up housing by 50 times and when the banks went under they decided to pass the bill to YOU!...'

people would be rioting in the streets no? perhaps widespread ignorance is safer for UK Plc.?

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I can say with certainty then don't teach about the fiat monetary system in education. If they do at A Level then it's probably Neo-classical which ignores private debt.

"Is there really any meaningful link between the BoE rate and what the banks charge punters?"

@ RentaBear

​I believe it's the 10 year bond rate which determines mortgage costs. If the bond market sells off it's game over. Hence QE to infinity until it doesn't worked then we truly are ******ed. The system will collapse, it's just when.

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Isn't it strange how the media have gone bearish all of a sudden. Some strings have been pulled somewhere - but I did expect the Guardian, critical of the Tories at any cost, to be above it. Saying that don't GMG have some investments in property portals? I seem to remember reading a while ago how they owned a few businesses engaged in HPI.

If you listen to the podcast they did about the anti-fossil fuels campaign the GMG had a lot of investments in oil companies too and didn't see hypocrisy as a reason to sell them.

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I can say with certainty then don't teach about the fiat monetary system in education. If they do at A Level then it's probably Neo-classical which ignores private debt.

"Is there really any meaningful link between the BoE rate and what the banks charge punters?"

@ RentaBear

​I believe it's the 10 year bond rate which determines mortgage costs. If the bond market sells off it's game over. Hence QE to infinity until it doesn't worked then we truly are ******ed. The system will collapse, it's just when.

No, the swap rates influence fixed rates mortgages.

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If you listen to the podcast they did about the anti-fossil fuels campaign the GMG had a lot of investments in oil companies too and didn't see hypocrisy as a reason to sell them.

I think you are reading too much into this.

Its more likely lazy jounros are just riping off somewhere copy.

You'd be suprised how many stories/themse are took from The Economist during the following week.

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I think you are reading too much into this.

Its more likely lazy jounros are just riping off somewhere copy.

You'd be suprised how many stories/themse are took from The Economist during the following week.

Maybe. Just don't mention the Guardian's overseas tax haven status.

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Is there really any meaningful link between the BoE rate and what the banks charge punters?

If I understand fractional reserve correctly, if I borrow 100k, that money is created out of thin air at zero cost.

To keep the regulators happy the bank then has to find about 3k of assets. Say they pay 5% for those assets, that's still 5% of 3% or 0.15% of the loan...

I can see how the base rate affects the publics perception of what a reasonable mortgage rate should be, but if my maths is correct, they could offer loans below the base rate quite profitably!

As I understand it they pay interest on the amount of the loan that is converted to cash - one of the reasons they ask what you intend to borrow the money for. Borrowing for cars could have a higher cost to the bank than housing because people are generally rather advers to buying houses with wads of cash! If interest rates go up they are also in competition for savers and have to offer better rates.

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Even Itv's "This Morning" ran an item this morning dicussing the Sun headline - "Rate Rise Alert, Carney: Interest to go up this year".

They were talking to an expert who was warning that if interest rates rise, those with trackers will see their mortgages going up.

She said it was good of Carney to warn that at some point they are going to have to pay more, so people would need to look at their expenses to see what they can cut back on.

She said although at some point, it did look rates could go down, it now looks like "the only way is up".

She pointed out there are more savers than borrowers in this country and they have had a hard time for the last 6 years.

Seeing this, seems like a turn around on MSM, and as the housing market is all about sentiment, there may be a few more nervous would be buyers out there right now this is making headlines.

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They were talking to an expert who was warning that if interest rates rise, those with trackers will see their mortgages going up.

wow must be a descendant of f-ing Einstein to work that one out , no sh*t sherlock

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At the moment though I can't see a driver for a tart rise. It is not likely to be inflation or an overheating economy. Even the prospect of the government not being able to finance debt seems to be low unless there is something they are not telling us.

I think this the frighteners being put on I'm attempt to cool the housing market and reduce consumer debt levels.

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At the moment though I can't see a driver for a *tart* rise.

Interest rates just got interesting!

They evidently don't call Carney a rockstar banker for nothing. Not only does he care for the economy, he also increases the rate of tarts! Nice :-)

Edited by Si1

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Think they can already see the next recession coming starting this October/November time. The reality for most people won't sink in until early next year. they are pretty much waiting until the last possible moment to raise rates so they can cut again in the depths of the recession sometime end of 2016.

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At the moment though I can't see a driver for a tart rise. It is not likely to be inflation or an overheating economy. Even the prospect of the government not being able to finance debt seems to be low unless there is something they are not telling us.

I think this the frighteners being put on I'm attempt to cool the housing market and reduce consumer debt levels.

The BoE is just the dag on the Fed's tail - if they stop fluffing the markets and actually increase their IR, we will follow - if they don't Carney will just read his next 'unexpected' condition off his big list of excuses...

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If the govt halts HPI, they are going to contract GDP and the trouble is all this excess has been propping up govt tax receipts.

But if nobody can afford to buy, tranasction volumes collapse, and they get no stamp duty either...

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http://www.dailymail.co.uk/news/article-3159322/Flats-worth-140m-sell-buyers-queue-road-230-homes-41-storey-tower-east-London.html

Has anybody seen this??? Interesting slant from the ramping DM.

I think what HPC needs is a dedicated thread for all the recent negative stories to be posted. Although I support their message, if you think about it and apply to something else, the massive u-turn by EVERY media outlet in a matter of days really stinks.

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http://www.dailymail.co.uk/news/article-3159322/Flats-worth-140m-sell-buyers-queue-road-230-homes-41-storey-tower-east-London.html

Has anybody seen this??? Interesting slant from the ramping DM.

I think what HPC needs is a dedicated thread for all the recent negative stories to be posted. Although I support their message, if you think about it and apply to something else, the massive u-turn by EVERY media outlet in a matter of days really stinks.

Anti foreigner slant? How new for the Daily Mail.

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RE: "Rate Rise Alert, Carney: Interest to go up this year".

Rates should be 5% NOW!

Carney is full of sh*t! a year or so ago he said when unemployment reached 7% he'd look at raising rates...

http://www.ibtimes.co.uk/carney-mark-bank-england-unemployment-rate-interest-525244

Well unemployment HAS reached 5.5%

http://www.tradingeconomics.com/united-kingdom/unemployment-rate

AND what do you hear from this cr**k Carney sweet FA!

REMEMBER: this gov is loaded with a HUGE debt...they will ONLY jack up what suits them ie: VAT etc.,etc.,etc...

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http://www.dailymail.co.uk/news/article-3159322/Flats-worth-140m-sell-buyers-queue-road-230-homes-41-storey-tower-east-London.html

Has anybody seen this??? Interesting slant from the ramping DM.

I think what HPC needs is a dedicated thread for all the recent negative stories to be posted. Although I support their message, if you think about it and apply to something else, the massive u-turn by EVERY media outlet in a matter of days really stinks.

Yup. We need a bearish thread.

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