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Realistbear

Paul Tucker Of The B O E Issues Warning Today

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http://business.guardian.co.uk/story/0,,1713410,00.html

Ashley Seager, economics correspondent

Monday February 20, 2006

The Guardian

While the Bank of England's quarterly inflation report press conferences are usually dominated by the comments of the governor, Mervyn King, there was, on last week's occasion, a particularly noteworthy statement from the Bank's executive director, Paul Tucker.
The recent big rises in the prices of assets such as houses and shares, he said, did not "provide a comfortable backdrop to monetary policy".
This one remark at a stroke helps explain the monetary policy committee's dilemma as it seeks to set the correct short-term interest rate for the British economy.
But Mr King has never been so sure and has been keener to deal with the country's housing bubble of the past few years. The Bank raised interest rates from late 2003 to mid-2004 at least in part to rein in the housing market and possibly by more than was justified to tame consumer price inflation. Then Mr King's impeccably timed warning in June 2004 that house prices were in danger of falling stopped the housing market in its tracks. It did not cause it to burst but rather to deflate gently.
TTRTR!

(Time to raise the rates)

Edited by Realistbear

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Interesting article European interest rates soon I think – they just can not let the economy suffer at the expense of HPI

“If the economy fails to perform as the Bank expects, interest rates will come down, with the effect of boosting the domestic economy again. But, as Mr King's predecessor, Eddie George, used to say, unbalanced growth is better than no growth at all. “

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But, as Mr King's predecessor, Eddie George, used to say, unbalanced growth is better than no growth at all. “

No it isn't if it destroys the productive parts of the economy.

The BOE are too ashamed to even mention the trade deficit nowadays.

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Some creative action may be coming...

Presumably, the BoE would like to reduce rates to help the economy WITHOUT generating

further HP Inflation. How to do it? Lower rates, but tight property lending.

Something like this might work... a surcharge for a loan of more than 80% of value

That's exactly what I think NEEDS to be done. I like your optimism on this - it would be a dream come true if lending was tightened.

The banks have demonstrated an inability to restrain themselves. Putting them on a leash for the benfit of everyone is the obvious thing to do. I'm just amazed they were allowed to run around the park snarling and snapping at innocent children for so long. <_<

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Some creative action may be coming...

Presumably, the BoE would like to reduce rates to help the economy WITHOUT generating

further HP Inflation. How to do it? Lower rates, but tight property lending.

Something like this might work... a surcharge for a loan of more than 80% of value

Thats an interesting idea, what kind of affect do you think this would have on first time buyers? or the housing market in general? How many people these days buy a house with any deposit at all? I had financial advice over the weekend and noticed a 100% mortgage consists of something like a 90% mortgage and a 10% loan..is that factored in to the figures?

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DrBubb,

By the time the bank do anything sensible the economy and a large proportion of the population will already be on its knees.

Even now I do not believe they have the capacity to think beyond their limited monetary concerns to see the real damage that is being done to the economy and how it is totally destroying future investment.

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Guest Winners and Losers

If only they could do something on the BTL side of things this would make a difference

Whack on a vendor tax (aka Australia), that'll put a dampner on 'em!

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Some creative action may be coming...

Presumably, the BoE would like to reduce rates to help the economy WITHOUT generating

further HP Inflation. How to do it? Lower rates, but tight property lending.

Something like this might work... a surcharge for a loan of more than 80% of value

Or creating a law that says that if a bank or other does not take reasonable steps to ensure that a loan is affordable, with a strict definition of affordable, then the bank cannot collect on the loan. The definition would include salary multiples, and the bank must have verified the income. For self-employed, there would be limits based upon past, verifiable, income.

Billy Shears

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Or creating a law that says that if a bank or other does not take reasonable steps to ensure that a loan is affordable, with a strict definition of affordable, then the bank cannot collect on the loan. The definition would include salary multiples, and the bank must have verified the income. For self-employed, there would be limits based upon past, verifiable, income.

But surely then no one except those already in properties would be able to afford a house. And those already in could not move up.

Lets face it if the £200,000 average is to be believed you would need an outstanding job to buy.

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I don’t think they will (or need to) any more creative than lowering interest rates.

After all it hasn’t done Ireland any harm – except for very high house prices.

£200000 might be a bargain soon. And rents will have to go up as FTB’er will have no choice to rent.

Nightmare scenario

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But surely then no one except those already in properties would be able to afford a house. And those already in could not move up.

Lets face it if the £200,000 average is to be believed you would need an outstanding job to buy.

That is the sort of logic that leads to banks saying, "we need to relax lending so that people can afford property". This is a very short term effect - people quickly borrow more money, driving the price up.

Likewise, if restrictions were imposed on lending you would quickly see that £200k house become a £100k house. Hence it would be affordable to someone on a reasonable salary.

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If only they could do something on the BTL side of things this would make a difference

You could make it so that any BTL investor in 90% of the country will be making a loss each month against and IO loan before thinking about voids at all.

(This is of course only the investors who bought recently.. Everyone else is fine.. Advice, rent from those guys.. they will need less money..)

You could make it so that the amount of empty rentals is hitting record levels.

You could leave the market filled with speculative investors who were looking to flip the properties but are now mortgaged to the hilt, loosing them money while they have mewed to invest for years with equity that will need large amount of CGT paid when they do sell.

We could all just be patient..

for every investor out there prepared to loose each month there are many more who were only expecting to have to for about a year (the average flip time)..

Out there, right now... there are many, many people in a great deal of trouble.

TTRTR's is geared to deal with voids and subsidising the rental when he needs to.. and although he can be a little arrogant.. You have to understand that he is more organised then many.

A year ago we could all have borrewed for a BTL that we would have to have subsidised..

and many people have done..

The negaitive equity many will find themselves in is magnified by the fact that they re-mortgaged into properties which had gained value to invest in ones too late to do the same..

and those first propeties, mortgaged to peak prices..

That profit is taxable at sale.. that you have borrowed against it and lost the money.. thats tough..

Pay up

Edited by apom

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Some creative action may be coming...

Presumably, the BoE would like to reduce rates to help the economy WITHOUT generating

further HP Inflation. How to do it? Lower rates, but tight property lending.

Something like this might work... a surcharge for a loan of more than 80% of value

Possible increases in stamp duty?

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You could make it so that any BTL investor in 90% of the country will be making a loss each month against and IO loan before thinking about voids at all.

It’s hard to say BTL is a loss – these figures are rough and done without increases inflation or anything else that could influence it and just show that it is not a loss

1: buy property £200 000

2: pay repayment mortgage £1300 a month (IO = £1000)

3: get rent £800 a month

4: find the extra £500

5: over 25 years you have paid out £150000 – but you own a £200 000 house

I would add that give 10 years the house should have gone up even after a crash as would the rent (although the mortgage 6% should stay about the same) – I also would expect investors to actually have £50000 to invest so that the mortgage meets income

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5: over 25 years you have paid out £150000 – but you own a £200 000 house

Most BTLs are taking out interest-only mortgages, so they won't even own the house after subsidising the rent for 25 years. Their sole aim was to capitalise on price inflation.

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4: find the extra £500

There is your problem.

Most of the Johnny come lately BTL's are skint at the time they buy and as has been said, buy on interest only hoping for capital gains.

Do you really think, with debt as high as it is, people can simply "find" £500. Whats to stop them "finding" £1000?? :lol:

Edited by BubbleTurbo

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Most BTLs are taking out interest-only mortgages, so they won't even own the house after subsidising the rent for 25 years. Their sole aim was to capitalise on price inflation.

Most say they are in it for the long term – my point was that it’s not a loss – even with only paying a IO mortgage you are still left with a house that will (looking to the past for example) be worth much more.

IO version – pay £200 a month – wait 25 years – total cost £60 000 – sell house 1 million+

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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