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What About This Nightmare Scenario.....

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As those who've read my posts know I am a major bear to the extent that I believe that paper currency is doomed with a probability estimate of 50% within the next 10 years, however I am worried about the following scenario.....

Public remains convinced of soft landing.

Economy faulters, but gov't convinces BOE to lower rates in stages to sub 3%. Inflation figures fudged down to 1.5%.

People become convinced low IR's are here to stay and take out even bigger loans based on "affordability".

Prices start rising again significantly.

Parents of those in their 30's & 40's who are struggling to buy either give £50k-£100k to them out of their equity, or die and give them £150k+.

FTB's take the above mentioned parental handouts as substantial deposites and then continue on interest only mortgages until they retire.

Once retired they enter into equity release loans (with non kickout clauses) until they die.

Now that all the equity has gone from the system the long drawn out crash finally comes circa 2055.

I know its not likely, as at some point over the next 50 years IR's WILL go up, but it could happen for 5-10 years. Comments anyone???

Anyone know what the stats are on what inheritance money is spent on? I'm guessing Holdays, cars, home improvements, general consumer goods. Maybe this is worth a separate thread.

JP.

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Once retired they enter into equity release loans (with non kickout clauses) until they die.

How can you enter into an equity release scheme??

Surely an IO mortgage won't be useful in building up any equity to release.

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Oooo... the hyperdebt arguement...

I think this is possible, its now termed the 'Greenspan approach to economic growth'.

The fallout from such actions would be massive and the pound might devalue to levels unheard in modern times - still it might keep Gordo looking good for a few years so its quite possible.

The only issue is whether things can be fudged if everyone else in the world raises IR's.

If the US, EU and Japan raise theirs our imports may well become more expensive... because it costs companies in those regions more to borrow.

This puts upwards inflationary pressure on our economy. IR's are used by the BoE to balance out inflation and would therefore have to rise accordingly.

Similarly the age of outsourcing and offshoring has probably reduced costs as much as possible. Where those economies we have moved business to i.e. India etc. now have strong economies their currency will also rise against the pound and make those costs more expensive also. Essentially saying that the deflationary influences of moving departments/businesses to lower cost economies only occur once... then those running costs rise.

Welcome to the globalised economy - we are all in this together now.

- Pye (Property Speculation Ninja :ph34r: )

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How can you enter into an equity release scheme??

Surely an IO mortgage won't be useful in building up any equity to release.

If a hefty deposite from parents had not been put in and they had not already rmeoved that equity with MEW then there would be some available.

Also, if interest only is paid then the nominal amount of the loan stays the same. Assuming that property over the long term keeps up with inflation say at 2% then in effect you are increasing your equity at 2% per year.

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As those who've read my posts know I am a major bear to the extent that I believe that paper currency is doomed with a probability estimate of 50% within the next 10 years, however I am worried about the following scenario.....

Public remains convinced of soft landing.

Economy faulters, but gov't convinces BOE to lower rates in stages to sub 3%. Inflation figures fudged down to 1.5%.

People become convinced low IR's are here to stay and take out even bigger loans based on "affordability".

Prices start rising again significantly.

Parents of those in their 30's & 40's who are struggling to buy either give £50k-£100k to them out of their equity, or die and give them £150k+.

FTB's take the above mentioned parental handouts as substantial deposites and then continue on interest only mortgages until they retire.

Once retired they enter into equity release loans (with non kickout clauses) until they die.

Now that all the equity has gone from the system the long drawn out crash finally comes circa 2055.

I know its not likely, as at some point over the next 50 years IR's WILL go up, but it could happen for 5-10 years. Comments anyone???

Anyone know what the stats are on what inheritance money is spent on? I'm guessing Holdays, cars, home improvements, general consumer goods. Maybe this is worth a separate thread.

JP.

How could you suggest such a thing, that the boomer generation currently in political power would sacrifice the country for generations just so that their lives are kept comfortable untill they die (their parents generation will of course freeze to death unable to heat their homes)

Brown is acting for the good of the country and all who live in it, he is an intelligent man with a wide understanding of the economy. He is looking to the long term as well as the short term and he would never try to conceal a dying economy behind massive debt any more then he would try to hide the resultant job losses behind massive public sector job increases.

In no way are his policies so economically flawed that the economic failure of this country is assured.. and any who suggest such a thing show a lack of understanding and belief in one of the greatest public figures that this country has ever seen that staggers me.

Gordon Brown should not be PM, he is a genius of such breading he should be KING!!!]

No more elections, why bother>? the man is perfect

Join me one and all

BROWN FOR KING !!!!

BROWN FOR KING !!!!

BROWN FOR KING !!!!

BROWN FOR KING !!!!

BROWN FOR KING !!!!

BROWN FOR KING !!!!

BROWN FOR KING !!!!

(Okay, a little bit fast and loose with what I really think. When he dies and is burried I will make a visit once a year to his grave and I plan to use it as a toilet)

(number two, not number one)

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If a hefty deposite from parents had not been put in and they had not already rmeoved that equity with MEW then there would be some available.

Also, if interest only is paid then the nominal amount of the loan stays the same. Assuming that property over the long term keeps up with inflation say at 2% then in effect you are increasing your equity at 2% per year.

The thing with these arguments is that they only work for a single generation. So lets say it's me as a 30 year old doing as you suggested, what do my kids do, I can't extract any equity form them like my parents did because that equity is needed by me.

Also it's looking like the chickens are coming home to roost slowely as far as debt is concerned. Ignoring interest rates the banks will still only lend 3.5 (sometimes 4.0) multiples at a push so if prices were to rocket people wouldn't be given the money and in an environment where credit is harder to come by the banks are not all of a sudden going to be lending at 6 or 7 multiples.

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As those who've read my posts know I am a major bear to the extent that I believe that paper currency is doomed with a probability estimate of 50% within the next 10 years, however I am worried about the following scenario.....

Public remains convinced of soft landing.

Economy faulters, but gov't convinces BOE to lower rates in stages to sub 3%. Inflation figures fudged down to 1.5%.

People become convinced low IR's are here to stay and take out even bigger loans based on "affordability".

Prices start rising again significantly.

Parents of those in their 30's & 40's who are struggling to buy either give £50k-£100k to them out of their equity, or die and give them £150k+.

FTB's take the above mentioned parental handouts as substantial deposites and then continue on interest only mortgages until they retire.

Once retired they enter into equity release loans (with non kickout clauses) until they die.

Now that all the equity has gone from the system the long drawn out crash finally comes circa 2055.

I know its not likely, as at some point over the next 50 years IR's WILL go up, but it could happen for 5-10 years. Comments anyone???

Anyone know what the stats are on what inheritance money is spent on? I'm guessing Holdays, cars, home improvements, general consumer goods. Maybe this is worth a separate thread.

JP.

or it could just do the normal thing and correct :)

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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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