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27 minutes ago, TheCountOfNowhere said:

It's all booming again !!!!

 

What are we missing ?

How can we be this wrong ?

Keep the economy running, people still feel good the hangover has not started yet, time for another round of drinks. :)

The banks need all the interest payments they can capture.  IO is month 1 year 1 profits forever.  The problem with selling a repayment mortgage product is profits go down for the bank as the mortgage matures.  An IO based stationary housing market is just perfect.  Its like buying your house with a credit card.

The home "owner" is on the hook for the HPI/HPC risk anyway, what do the banks care.  Any house capital price loss causing the bank to take a loss they can write off against tax anyway, so to some further significant extent.

 

 

* Customer base on the hook for IO interest payments for 10+ years

* Customer financially screwed over for any equity they provided (and any other assets they have through debt recovery) left with little

* House disposed of allowing most of the original capital to be recovered

* Bank reports the biggest loss they can out of the above situation (adding administration fees and such)

* Bank recovers above loss from future profits over the next tax years

Bank win/win/win/pain/win

 

You can speculate the bank has taken 62% of the principal sum in interest payments alone (5% yield compounded).

You can speculate the equity/assets they can recover might be as much as 20% of the principal sum.

You can speculate a HPC will result in 60% of the principal sum (based on finger in the air guess 40% drop) can be recovered as disposal.

You can speculate the bank can report they made a loss of as much as 50% of the principal sum.  Which they get a rebate on in a future tax year.

Plenty of profit to be taken in there when you only risked 5% of principal sum (Basel/FRB) on your balance sheet.

 

Edited by Odin
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0.25% base rate......that is high, euro is zero.....still plenty of room for movement, have to hold something back for emergency measures........Still the FTSE is all time high, things are looking good, devalue the pound a bit and things can only get better.;)

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Interesting chart of regional GDP per head. Only two regions from twelve are richer than they were before 2007: London and the South East.

Everywhere else is no better off, or poorer.

https://www.theguardian.com/commentisfree/2017/jan/10/blunt-heckler-economists-failing-us-booming-britain-gdp-london

Quote

On statistical aggregates the UK is enjoying a recovery. But in reality this has been a recovery for owner-occupiers in London and the south-east. It has locked out those without big assets, such as the young, and those renting in the capital. It has penalised the poor. And it has impoverished those who have been forced on to zero hours or bogus self-employment.

To go back to Haldane’s Michael Fish analogy, the problem with economists isn’t the failure to foresee the storm; it’s that by concentrating on aggregates, they insist it’s sunny outside, when it’s T-shirt weather for a few in central London and the rest of the country is getting soaked.

There was nothing accidental about this result. It was precision-engineered by Cameron and Osborne: make central and local government deliver the cuts, and leave the job of securing a turnaround to the Bank of England with its one-size-fits-all monetary policy. Governor Mark Carney can’t set one interest rate for Port Talbot and another for Pimlico. That task of progressive redistribution falls to the state, and under the Tories it wasn’t on the table.

The end result is that the recovery constantly boasted about by the Tories was so partial, so patchy and so dedicated to putting money in the pockets of the already wealthy that it makes a mockery of Theresa May’s speechifying this week about a “shared society”. As the Centre for Research on Socio-Cultural Change argues, it also renders any discussion of unitary issues such as GDP or jobs almost meaningless.

Margaret Thatcher is famous for claiming that “there is no such thing as society”. Cameron’s legacy will be that there is no such thing as an economy – but a series of regional economies with vastly different prospects. A state-subsidised boom for inner London; a neglected pauperism for the Humber.

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3 hours ago, TheCountOfNowhere said:

0.25% IRs,

£170Bn low intererst mortgage give away.

FTSE flying high.

It's all booming again !!!!

 

What are we missing ?

How can we be this wrong ?

Really?

I don't see this reflected in the average Brit household.

Yes... I travel a lot, UK and worldwide...and have noted a big increase in tourists here in the UK thanks to the increased purchasing power of the euro and greenback.

No... I have not heard of the huge 'boom' in the UK pubs and restaurants, hotels lounges, even from senior and supposedly well off people.

Albeit... I don't move in the circles that see the 'wealth'... bankers, politicians, financial types, aristocrats.

I'm just a lowly engineer with well placed contacts in all the super majors and big services.... all of whom are taking a huge kicking.

SHOW ME THE MONEY?

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41 minutes ago, cashinmattress said:

Really?

I don't see this reflected in the average Brit household.

Yes... I travel a lot, UK and worldwide...and have noted a big increase in tourists here in the UK thanks to the increased purchasing power of the euro and greenback.

No... I have not heard of the huge 'boom' in the UK pubs and restaurants, hotels lounges, even from senior and supposedly well off people.

Albeit... I don't move in the circles that see the 'wealth'... bankers, politicians, financial types, aristocrats.

I'm just a lowly engineer with well placed contacts in all the super majors and big services.... all of whom are taking a huge kicking.

SHOW ME THE MONEY?

The boom in tourists will go when the stock purchased at ~ £1=~E2 goes.

Then the problems with high UK hotel costs kick in.

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39 minutes ago, kzb said:

Hence the recent emphasis on "mental health".

Can't you see how fantastic everything is?  If not you must need Prozac.  That's why they're increasing the budget for mental health :)

This post/idea should get far more attention, it's a bloody good point.  Kafka would be proud.

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8 minutes ago, chronyx said:

This post/idea should get far more attention, it's a bloody good point.  Kafka would be proud.

I believe 1 in 5 inhabitants of Blackpool are on antidepressants.  They need to get the rest of the country up to the same level (not far to go actually).

And yes, I think "mental health", in practice, translates as putting more people on these drugs.

In reality, "poor mental health" is usually a logical reaction to impossible circumstances.

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Feels false and unsustainable to me. Is this is the bulltrap phase?

  • Mortgage rates can't go any lower, and even if they did, it would make very little different to repayments.
  • US has started to rise rate.  We're the 51st state we'll have to follow.
  • Politicians turning against Carney.
  • BTL is now a terrible proposition.
  • Volumes at all time lows

Impossible to predict the future, but I have no idea how they'll keep this going.

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One has to suspect that with the GDP per capita disparity within the UK then in local purchasing power terms some UK regions are getting very close to eastern european countries like Poland - whereas Poland has much higher home ownership rates which effectively means that their standard of living could be on a par or maybe even higher than in some parts of the UK.

 

Quote

 

https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+Kingdom&country2=Poland

Local Purchasing Power in Poland is 25.86% lower than in United Kingdom

 

 

Edited by billybong
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1 hour ago, spyguy said:

The boom in tourists will go when the stock purchased at ~ £1=~E2 goes.

Then the problems with high UK hotel costs kick in.

Eh? Euro & USD has about 15% more purchase power since the referendum. Maybe is great for tourists... sh1t for those forced to purchase parts & consumables from abroad.

Hotels are in the business of attracting clients so it is not in their best interest to fleece them... and more travelers are content to use things like hostels and airbnb etc... and who are also saavy.. tripadvisor etc...

Parity in to these currencies will be a nightmare scenario... hopefully that isn't going to happen. Try holding a commercial offer to a client for more than 30 days right now... you can lose your shirt in my business if your contracts are in big numbers. Some big players are offering a week, or even less on quotes. Playing chicken with the market... you'll lose.

https://www.visitbritain.org/latest-monthly-data

https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/bulletins/overseastravelandtourism/oct2016#main-trends-in-figures-and-charts

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5 minutes ago, billybong said:

 

One has to suspect that with the GDP per capita disparity within the UK then in local purchasing power terms some UK regions are getting very close to eastern european countries like Poland - whereas Poland has much higher home ownership rates which effectively means that their standard of living could be on a par or maybe even higher than in some parts of the UK.

 

 

In which case, wouldn't they want to return there?

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9 minutes ago, rantnrave said:

In which case, wouldn't they want to return there?

Not necessarily immediately though.

The comparison is in local purchasing power terms which also translates into standard of living and one of the points of the thread is financial comparisons.

 Wages are far higher in the UK then there's stuff like tax credits and benefits etc.   There's still significant reason to have a job in the UK and save to send/take back home especially if you skimp on accommodation say by cramming.   

Edited by billybong
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17 minutes ago, cashinmattress said:

Eh? Euro & USD has about 15% more purchase power since the referendum. Maybe is great for tourists... sh1t for those forced to purchase parts & consumables from abroad.

Hotels are in the business of attracting clients so it is not in their best interest to fleece them... and more travelers are content to use things like hostels and airbnb etc... and who are also saavy.. tripadvisor etc...

Parity in to these currencies will be a nightmare scenario... hopefully that isn't going to happen. Try holding a commercial offer to a client for more than 30 days right now... you can lose your shirt in my business if your contracts are in big numbers. Some big players are offering a week, or even less on quotes. Playing chicken with the market... you'll lose.

https://www.visitbritain.org/latest-monthly-data

https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/bulletins/overseastravelandtourism/oct2016#main-trends-in-figures-and-charts

UK shops will have bought stock for a few qaurters when the pound was worth a lot more against tthe E/$

 

That stock runs down, the new contract is made with pound lower, so the shop price of the goods goes up.

We have a few quarters where stock was bought with pound high, and is for sale with the pound low.

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