How high can Carney's bubble go.

[Venger]

21 hours ago, Muddlehead said:

I remember another thread where someone mentioned examples of real people on interest-only mortgages who didn't realise they weren't repaying their capital! I think in theory these sort of people could get compensation, but only if it were provable that the meaning of interest-only was not explained to them.

I don't think high income multiples counts as mis-selling. They drum into you for hours: "If interests rate go up 5% your monthly payments will increase by £500..."

The problem is not mis-selling of mortgages, but a wider problem of property propaganda. People know there is a risk they will lose their job, or even struggle to continue making repayments due to other bills and if interest rates rise. But it is risk worth taking because property prices only ever rise, and usually rise rapidly.

 

In recent years OO interest-only mortgages been difficult to get.   I know of a barrister who got one from Llloyds Bank, but it was s suitable product because their income is sporadic.  They might go months without getting paid for their work, and then the fees get paid in one go, and they make a lump contribution to their mortgage.

Buyers made their own choices.  Property propaganda comes from many a homeowner too (including buyers)... not some elite council of banks or PTB.   Don't most of us want to own a home, especially those with families.   Some resist because high risks involved in high property prices.  They rent and await better value (for years, but only seen more HPI++++).

Buyers made their own decisions.  Their own choice and in recent years prices here 30% up.   Where's the renter side compensation?   Renters have to adjust more with their circumstances to changes in personal circumstances.

Too much of the victimhood offered for the winners, (show me some losers in IO mortgages against house prices) comes from the quest of protecting HPI, seeing other people as lessor, and themselves as superior knowledge mega egos, who believe they know more and should approve people's life/market decisions.   Really you would have compensation paid to all the buyers who outbid me for houses, because 'property only ever rise, and usually rise rapidly' - which has been the actual case for 15 years+ here, apart from a temp dip in 2008-09. 

14 hours ago, Toast said:

What exactly would an explanation of "interest only" comprise? An explanation of the word "interest", and a gentle laying out, in simple terms, of what "only" means? Would they then have a case for compensation if the words used in the explanation weren't also explained?

Look, if the products were called "non-amortizing claims in perpetuity on your personal curse of Adam", I'd understand the need, but at some point we have to assume that the customers speak English and are allowed out on their own.

(I am trying to write this very quietly, so we don't awaken Venger).

IO (with massive equity in the house, all too often).   I also sympathise with these people, as I too found out recently that the home I am renting, means that I don't actually own it. 

[LC1]

3 minutes ago, Venger said:

I too found out recently that the home I am renting, means that I don't actually own it. 

[Muddlehead]

12 minutes ago, Venger said:

Buyers made their own decisions.  Their own choice and in recent years prices here 30% up.   Where's the renter side compensation?   Renters have to adjust more with their circumstances to changes in personal circumstances.

I agree. I don't know much about the PPI mis-selling, but as I understand it, the case for compensation rests on people not knowing they were paying for PPI. It was just bundled in. I don't think there is anything comparable with mortgages. I don't believe the interest-only mis-selling case would be successful, but I think that may be the most relevant.

Did you hear about Trump's loan with Deutsche Bank? They sued him as he wouldn't repay. He counter-sued saying they owed him compensation because they caused the financial crash and that's why he couldn't pay. He's a more special snowflake that most (all?) BTLers though. But is seems to suggest this madness is taken more seriously might be expected.

 

[Little Frank]

1 hour ago, Venger said:

 

Buyers made their own decisions.  Their own choice and in recent years prices here 30% up.   Where's the renter side compensation?   Renters have to adjust more with their circumstances to changes in personal circumstances.

 

So do non-buyers unless they genuinely are unable to afford the deposit or monthly repayments. If they cannot afford monthly repayments then renting (especially social renting) is surely more appropriate. 

Re unemployment (Muddlehead's point I think), that is in essence a judgement about risk. Currently unemployment is very low, in fact economy is more or less at full employment with unemployment around 4-5%. Even during GFC with the worse unemployment since the 80s this only rose to around 10%. In other words 90% were still employed. So the downside risk is being in that 5% group for a period of time. Unemployment affects ability to pay the rent as well, so for it's easy to understand why most people see it as a fairly small risk. Overall, it is, and their decisions appear perfectly rational.

 

[billybong]

2 hours ago, Muddlehead said:

I agree. I don't know much about the PPI mis-selling, but as I understand it, the case for compensation rests on people not knowing they were paying for PPI. It was just bundled in. I don't think there is anything comparable with mortgages. I don't believe the interest-only mis-selling case would be successful, but I think that may be the most relevant.

Did you hear about Trump's loan with Deutsche Bank? They sued him as he wouldn't repay. He counter-sued saying they owed him compensation because they caused the financial crash and that's why he couldn't pay. He's a more special snowflake that most (all?) BTLers though. But is seems to suggest this madness is taken more seriously might be expected.

 

My highlight.

There's no reason (apart from ability to finance the claim) why anyone else in similar circumstances couldn't use that reason for a counter claim.  Indeed I expect they should be advised to do so.  If they can't sue their own bank as being responsible they could all sue the likes of Deutsche Bank and in the UK maybe the BoE as well.   Virgin might yet get some belated claims on behalf of Northern Rock

Mind you in that regard in the UK it's likely to have been all rigged legally already to favour the banking system.

Even so maybe that's one of the reasons the BoE is so keen to keep the wicked ponzi going. 

Edited March 3, 2017 by billybong

[Venger]

6 minutes ago, billybong said:

My highlight.

There's no reason (apart from ability to finance the claim) why anyone else in similar circumstances couldn't use that reason for a counter claim.  Indeed I expect they should be advised to do so.

If they can afford litigation, bring on the claims for the housing jumbo price outbidders.  

That and they can claim for anything else too, such as Angel Delight, perhaps from a solicitors with a client who insists they take the case, no matter how commercially flawed.

Some solicitors can work deals with lenders to restructure debt/charges for some homeowners (the very few who have been caught out in recent times).  I have read about it.  

Doesn't mean it is going to happen for all the outbidder owners.  

I rent because of concern of correction from these house prices.  Can't do anything about other buyers powered by bomad setting new peak prices, nor those who for 8 years+ now believe those owners/buyers are the misled ones for their own adult market choices, on the innocence awarding.  Some owners are £200K up in value since

On 3/2/2017 at 8:42 AM, Lavalas said:

No, but applying validity to an arguement just because it formed part of a failed application for a Judicial Review is pretty weak. That's the issue. You're free to read or not read the application as you wish but I'm not sure why you'd attribute any weight to it without having done so.

They submitted a written application and that was rejected. They submitted an application in person and that was rejected. If their arguement was about S24 being unfair because it doesn't grant free Angel Delight to all Landlords - same process.

 

Quote

Philip Hammond tells borrowers to share economic blame

4 May 2012

People who overborrowed during the economic boom must take responsibility for their part in the financial crisis, the defence secretary has said.
Philip Hammond said consumers and home-owners who took out loans, spent on credit cards and accepted large mortgages were "consenting adults".

Mr Hammond, who helped formulate David Cameron's economic strategy in opposition, told the newspaper lifestyle expectations had "run away with us".
"We started living a lifestyle both in private consumption and in public consumption that we could not afford," he told the newspaper.

"People feel in a sense that someone else is responsible for the decisions they made. Of course, if banks don't offer credit, people can't take it.   

"But there were two consenting adults in all these transactions, a borrower and a lender, and they may both have made wrong calls.  

"Some people are unwilling to accept responsibility for the consequences of their own choices."

http://www.bbc.co.uk/news/uk-17948535

 

Quote

 

06 Sep 2013

Emma Kelly fell foul of Santander's punitive stance on interest-only borrowers. Mrs Kelly, 48, had repayments raised from £825 a month to £1,350 overnight.
Like other interest-only borrowers, she was offered a two-year fix at 4.99pc by Santander when her fixed deal ended. Her only alternative was Santander's standard variable rate of 4.74pc as no other lender would offer her interest-only.
Mrs Kelly said: "It does not seem right to offer 3pc rates to first-time buyers but not interest-only. We are now living on the edge financially. If interest rates rise by even one quarter of a per cent, we may be forced to sell the family home."

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10290781/Banks-squeeze-interest-only-mortgage-borrowers.html

 

Stand down HPI protectorz, the innocents here sold, so standby for the compo on someone else who doesn't get out with the mad-gainz.... 'they didn't know' excuses ready please.

Sale Date	Property	Price Paid
15 Feb 2016	Terraced, Freehold	£625,000
01 May 2008	Detached, Freehold	£410,000

 

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=46880726&sale=25877400&country=england

Then again, year after year have to read the living breakdown with excuses for owners with mortgages, even those who are totally happy with their choice to have mortgage and be an owner.   Renters to pay and foreverHPI is best, yes.  Can't be a threat to the HPI.

Quote

For so long now the Bliar government and Cameron government have had to keep HPI going in order for all those huge mortgages seem like they are making sense to the individual. It is like a £150k mortgage debt is not really a debt to some people when their house is worth more. You can see why people are so fearful of the value of their home falling below the level of mortgage debt year after year, for the first time for millions of people mortgage debt really will be seen as DEBT.

 

 

Quote

 

The only innocents are those who bought their first home in the last 5 years.

 

Quote

A lot of people actually bought houses in a panic as prices rose because they had few other options, probably pressure from family) and they wanted to "own" something before they start their family... For them all I can feel is pity you however seem to feel that they should suffer for their moment of weakness and seem to want to gloat.

 

Some relief...

Quote

Seriously, if this is the case that the words 'Interest only' are too much of a stretch for that brain to compute, the person shouldn't be let out of the house without some form of supervision.

Endowment, yes I get that people were seduced and the fact that the repayment part was market dependent might not twig - though it's still not a difficult concept.

But *interest only*? I dread to think there's people like this driving on the road, thinking road signs are just a form of modern art and that 'no naked flames' next to a gas works means they shouldn't smoke in the nuddy.

The mind truly boggles.

 

[billybong]

28 minutes ago, Venger said:

If they can afford litigation, bring on the claims for the housing jumbo price outbidders.  

That and they can claim for anything else too, such as Angel Delight, perhaps from a solicitors with a client who insists they take the case, no matter how commercially flawed.

Some solicitors can work deals with lenders to restructure debt/charges for some homeowners (the very few who have been caught out in recent times).  I have read about it.  

Doesn't mean it is going to happen for all the outbidder owners.  

I rent because of concern of correction from these house prices.  Can't do anything about other buyers powered by bomad setting new peak prices, nor those who for 8 years+ now believe those owners/buyers are the misled ones for their own adult market choices, on the innocence awarding.  Some owners are £200K up in value since

 

 

 

Stand down HPI protectorz, the innocents here sold, so standby for the compo on someone else who doesn't get out with the mad-gainz.... 'they didn't know' excuses ready please.

Sale Date	Property	Price Paid
15 Feb 2016	Terraced, Freehold	£625,000
01 May 2008	Detached, Freehold	£410,000

 

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=46880726&sale=25877400&country=england

Then again, year after year have to read the living breakdown with excuses for owners with mortgages, even those who are totally happy with their choice to have mortgage and be an owner.   Renters to pay and foreverHPI is best, yes.  Can't be a threat to the HPI.

 

Some relief...

 

I'm looking forward to the time (which will hopefully be soon) when the extravagant, reckless and overborrowed buyers (by definition most if not all buying and MEWing etc in recent times since prices went crazy) have to take the consequences of house price falls - but some of them in having to face that lower house price reality and their own decisions might still decide to sue the banks for lending them the money as well as for helping to cause the collapse.  Not a taxpayer/house price support bailout for buyers and bankers.

 A double whammy for all the VIs.  

I'm not holding breath for much success for them especially in the UK but if it was a success for Trump then why not.

Edited March 3, 2017 by billybong

[Sterling Loss]

On 3/2/2017 at 2:37 PM, grasshopper said:

 

"Let me conclude by reiterating the main points of the analysis here. First, not all asset price bubbles are alike. Asset price bubbles that are associated with credit booms present particular challenges, because their bursting can lead to episodes of financial instability that have damaging effects on the economy.

"Second, monetary policy should not try to ***** possible asset price bubbles, even when they are of the variety that can contribute to financial instability. Just as doctors take the Hippocratic oath to do no harm, central banks should recognize that trying to ***** asset price bubbles using monetary policy is likely to do more harm than good".

It's curious that addressing a bubble is regarded as dangerous even if the bubble causes financial instability, and that the same view might prevail after a financial system meltdown which needs trillions in bailouts.

The Brunnermeier and  Schnabel paper is useful, many thanks for this, lots of insights from a quick look, but underlines that there's no easy way of understanding what's happening, or what to do to get out of it, and that interest rate increases aren't likely. 

[grasshopper]

30 minutes ago, Sterling Loss said:

It's curious that addressing a bubble is regarded as dangerous even if the bubble causes financial instability, and that the same view might prevail after a financial system meltdown which needs trillions in bailouts.

The Brunnermeier and  Schnabel paper is useful, many thanks for this, lots of insights from a quick look, but underlines that there's no easy way of understanding what's happening, or what to do to get out of it, and that interest rate increases aren't likely. 

Yes. It really is a heavy in take of breath when you realise that from their theoretical analysis they are quite prepared to let the bubble take the system where it will. And your right that the Brunnermeier and Schnabel paper makes interesting reading.

Edited March 3, 2017 by grasshopper
Spelling

[Si1]

5 minutes ago, grasshopper said:

Yes. It really is a heavy in take of breath when you realise that from their theoretical analysis they are quite prepared to let the bubble take the system where it will. And your right that the Brunnermeier and Schnabel paper makes interesting reading.

Focusing pragmatically on what we should do rather than the rights and wrongs, this still says to me don't go balls deep in mortgage leverage in an all in bet on one possible outcome.

[grasshopper]

1 minute ago, Si1 said:

Focusing pragmatically on what we should do rather than the rights and wrongs, this still says to me don't go balls deep in mortgage leverage in an all in bet on one possible outcome.

If I hadn't bought my family home by 2005 I would not have been in this market. I was reading HPC since 2003 and joined in 2005 when I thought HPC was hard baked into the system. 

But they have fiddeled and faddeled...

Not good.

[zugzwang]

Debt seems to act like a one-way function on the economy: easy to create, profoundly difficult to invert.

To complete the analogy, Keynesians are living in an imaginary world of Caesar cyphers...

 

Edited March 4, 2017 by zugzwang

[mathschoc]

https://www.google.co.uk/amp/www.bbc.co.uk/news/amp/39150718

[billybong]

^

Google/bbc link

Quote

 

"However, we continue to think that the UK will weather these well, and expect GDP growth of 1.8% in 2017 and 2.5% in 2018."

 

Some time ago I read an article that suggested that below 2% unemployment increases.  So on that basis 2017 is going to see an increase in unemployment - and in 2018 unemployment will decrease.  

Of course the figures are predictions so could well be wrong, better or worse. 

Edited March 5, 2017 by billybong