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Would You Buy If Prices Fell 25%? If Not, Why Not?


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Well Carney and others (major stress tests) keep passing the banks specifically for a hard HPC, along with other major events like stock market crash, sterling crash and even runaway inflation.... and they keep passing.

Yet on HPC, it's like all these reports are false or something.

Just because they have theoretically tested them is no proof they are going to test that theory ....like i said i`m guessing like everyone else

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It's not time yet!

Rising rents and rock-bottom mortgage rates mean even homeowners with huge mortgages are better off than tenants

Miguel Sard, managing director of mortgages at Santander UK, said: “People assume that buying a property will put them under greater financial pressure, but often the reverse is true.

https://uk.finance.yahoo.com/news/mapped-buying-now-cheaper-renting-071236210.html

THe clue is in the name .......By James CONnington | Telegraph

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That much is true - but I'm happier the way things are coming together - ftb buyer side finding mortgage lending tighter under MMR as BTLers danced into buying more and more last few years - and now reeling in astonishment. 3% stamp duty hike. IHT carry down (budget)

Just would just like some wider acceptance banks are much stronger position - so many postings about how they would fail into slightest correction. Personally feel much much happier - from mid 2015 my whole outlook has brightened so much. Hope it's the same for you, in a very good financial position. Yet on hpc it seems some are more depressed than ever, including those who insist on banks being too weak, and pointing to FLS.

... [i'll add as a final point that if you can make a convincing case for a loss for depositors, then we need to let the BoE know ASAP, because they're about to stress test banks against a 35% fall in house prices, and the expectation is that banks' Tier 1 capital will be able to take the hit.]


The Bank of England is happy with banks, and is now worried about the rest of the financial system

If a shock hits the markets and investors rush to sell their assets, Mark Carney fears liquidity could dry up rapidly

18 Jul 2015


..But amid the possible threats to the financial system, he pointed to British banks as a strong point which can absorb and mitigate instability – a major change from the aftermath of the credit crunch.

“These could cause investors to panic, leading to rapid and unexpected flows of funds which could take asset managers by surprise.”

..That means asset managers, insurers, hedge funds, central counterparties where securities are traded and settled – all important parts of the system which have not had as much focus because banks merited so much attention following the crash.

http://www.telegraph...t-managers.html


Three Truths for Finance - speech by Mark Carney

Remarks given at the Harvard Club UK Southwark Cathedral dinner, London.
21 September 2015

[...]Moreover, when next time proves no different, the financial intermediaries at the core of the system will be on a substantially stronger footing. Their capital requirements have already increased ten-fold and their liquid assets are up four-fold. Their trading assets are down by a third and intra-bank exposures by two-thirds.

http://www.bankofeng...s/2015/843.aspx

There's a more recent bank stress test than this one 2014, and it's my understanding banks performed even better to the most recent stress-testing. That's all the risks combined... not just one from all the risks. They can handle HPC.

Five major banks passed the test.

The results show that the banking system is "significantly more resilient", said Bank of England governor Mark Carney, and that the "growing confidence in the system is merited".

"This was a demanding test," he added.

Stress test scenario

Sterling falls by about 30%
House prices fall by 35%
Bank rate rises to 4.2%
CPI inflation peaks at 6.6%
Unemployment rises to nearly 12%
GDP falls by 3.5%
Share prices fall by 30%

http://www.bbc.co.uk/news/business-30491161

The essential difference boils down to the stability of these prices. How confident can you be that you can get your money on the table and then get your money and your winnings off the table before the market turns against you.

[...]I still hold the same opinion. I am not sufficiently convinced that prices are stable at this level to start handing over every last penny of savings to a bank in order to buy a shit house. I am happy to pay a BTLer to take that balance sheet risk on my behalf. I'd rather we'd had a massive correction in prices and the extermination of the buy-to-let sector, but that hasn't happened yet, so I take the world as I find it and make a call. I sleep well at night.

[...]I'm not saying, "Golly, if I can make everyone believe this rubbish, I'll get a cheap house", I'm saying, "This is societally destructive unsustainable idiocy and I refuse to be complicit by an act of commission". I can't stop some herbert like Mark ganging up with a shit bank and using my earnings to pay a BTL mortgage but I can chose not to hand over my savings and sign up for a whacking great repayment mortgage.

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Carney says a lot but does nothing .... however he has been strangely quiet since Janet raised USA rates ... Carney's forward guidance seems to be the same as Merv's fan charts; utter nonsense and completely worthless.

One of the first things I recall him doing as Governor was give an interview to Guardian, warning buyers to think very carefully before buying.

I don't know what Carney can do other than get banks ready, behind the scenes, while others dance into the market at higher prices.

UK forward guidance is... well it sounds good, and projects position of power/control.

Yesterday's FT, suggesting markets won't just be marching to whatever the BoE wants with its desire for 'price-stability'.

IMO only the largest economies can give forward guidance. US, maybe the EU. China and Japan maybe below the threshold. The UK economy is more influenced by what the world does than we influence the world.

So forward guidance for the UK is useless. Unless it is of the form "we will not raise rates unless the US raises rates/some external event forces us to raise rates", which everyone knows anyway.

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Well Carney and others (major stress tests) keep passing the banks specifically for a hard HPC, along with other major events like stock market crash, sterling crash and even runaway inflation.... and they keep passing.

Yet on HPC, it's like all these reports are false or something.

Fiat money and fractional reserve lending is all a game of confidence, they have to keep up appearances.

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That much is true - but I'm happier the way things are coming together - ftb buyer side finding mortgage lending tighter under MMR as BTLers danced into buying more and more last few years - and now reeling in astonishment. 3% stamp duty hike. IHT carry down (budget)

I`m much happier with the attack on BTL it will make a difference and see some downside, hence not buying now even when nominal prices are still at 05-06 levels in my part of the world

Fiat money and fractional reserve lending is all a game of confidence, they have to keep up appearances.

Spot on the Uk housing market is much the same and that confidence/no confidence effects both sectors in the exact same way

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That much is true - but I'm happier the way things are coming together - ftb buyer side finding mortgage lending tighter under MMR as BTLers danced into buying more and more last few years - and now reeling in astonishment. 3% stamp duty hike. IHT carry down (budget)

My mood has also improved my strategy of waiting for sanity to return is slowly paying off. The BTL+HTB bubble is starting to burst alongside the economy.

i was very down start of 2015 with the 2014 HTB bubble reversing some good years of waiting out of the market. But now its all coming together quite nicely.

easy to forget the 'wins' when we get them, some absolutely huge events towards the end of 2015, 2016 should be an absolute dream for us.

the HPC is less than a year away now, just got to keep my powder dry for the big one

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B0llocks. They need to be told they will never again be bailed out. They would then regulate themselves to much much lower lending.

Really?

You think those sociopaths give a flying turd about making the world burn to make a buck?!

They'd simply hold everything to ransom (again)

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I`m much happier with the attack on BTL it will make a difference and see some downside, hence not buying now even when nominal prices are still at 05-06 levels in my part of the world

Spot on the Uk housing market is much the same and that confidence/no confidence effects both sectors in the exact same way

Good. :)

My mood has also improved my strategy of waiting for sanity to return is slowly paying off. The BTL+HTB bubble is starting to burst alongside the economy.

i was very down start of 2015 with the 2014 HTB bubble reversing some good years of waiting out of the market. But now its all coming together quite nicely.

easy to forget the 'wins' when we get them, some absolutely huge events towards the end of 2015, 2016 should be an absolute dream for us.

the HPC is less than a year away now, just got to keep my powder dry for the big one

Good.

Same. First half of 2015, reading ever more BTLelegraph stories of smiling smilers buying more and more BTLs... nearly got too much to take - then so much weight lifted from budget day.

However we do still have many hpcers stuck in the rut. Always going on about HPC = banks failing, saver wipeout. Always on about bank bailouts. If they tap FLS into HPC, so be it. There's £Trillions in equity on the owner side. Crash and lend profitably, and safely, with smaller mortgages, and then higher levels of annual transactions for decades.

They're stuck in another dimension... world has seriously moved on. And then all the posters about how, "HPC is impossible, De Beer diamonds, any falls in prices financial meltdown of the banks, and jobs losses, and people won't MEW, so people will stop spending and Gov doesn't want that, and can't allow renter-savers to enter at lower prices, so only HPI++++"

I'm going to hazard that in 2008 the banks went easy on the margin calls as they knew that the only thing that could save them was the government stepping in to fill the hole on the liability side of their balance sheet as the money markets closed to them. As Brown did not want to see house prices collapse and that collapse to be interpreted as further evidence of his incompetency the lenders quickly came under pressure to put a halt to the fire sale (and were given assurances that they'd not be going to the wall).

Again, this time it is different. The liability side of the banks' balance sheets are now to a much greater extent retail deposits which will not be flighty in a crash so the systemic threat to the solvency of the banking sector entire no longer exists. Further the systemic threat was so significant because there was no framework for handling the insolvency of a decent sized bank. Its books would essentially freeze - there is a reason that they bailed the banks, the alternative was worse. However, the Treasury immediately got the 2009 Banking Act on the statute books and there has been a practice run for the resolution regime with a minnow, the Dunfermline, which passed off without fuss.

Hence now the execs at the big lenders know two things. Firstly, they will be allowed to go bust, because they will just be unfussily swept into UKAR. Secondly, they will know that if the bank they run goes bust, they will lose their nice little troughing job, and they won't get another so good. They are going to throw the buy-to-let investors under the bus at the first sniff of trouble and each lender will know that they mustn't dawdle with the mercy killings as their competitors would seize on the error by getting hold of and disposing the assets on which their loan books were secured before the oppo did.

The mechanics of all the leverage and the incentives for the lenders to murder their customers are extraordinary.

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