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Tuberider

Credit Tightening Is The Key

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Here on HPC we go into a feeding frenzy on every bullish press piece, as we analyze and overanalyze every scrap of data available, trying to convince ourselves that the crash is underway.

However I get a nagging feeling that all this is pointless and we are still missing the key to the whole thing.

We havn't seen any real attempt at credit tightening by the banks so far.

No tightening, no contraction of the money supply.

No contraction of the money supply, no bust.

Maybe stagnation is the way it will go, until or unless that credit tap is turned off.

Someone please prove me wrong.

I see that there is a posted thread by Dr Bubb but reading through it, very little hard evidence of credit tightening. Banks are still chucking it about. Except for a minimal restriction on BTL lending for newbuilds, the cash tap is still fully turned on. And so far not even a sniff that it will be any other way any time soon.

Anyone have any evidence to the contrary ?

Statistics, graphs, charts, statements from Merv ?

I reckon we have shot our loads far too soon, and things might have a long way to go yet ...

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Credit tightening would be nice.

And it would certainly put an end to HPI.

But I think that to bring prices down there will need to be more than credit tightening.

I think we need to see the people who have already bought at silly prices (or MEWed up to silly debt levels) getting squeezed.

This is already happening. Rising repossessions and bankruptcies/IVAs.

Cost of living rising far faster than wages.

I think the lenders could maintain a free and easy credit policy and we could still see a downturn, it dosen't have to be a deciding factor. The lenders may offer £500K but if someones sentiment or common sense dictates then they won't.

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I tried to increase the credit limit on my 1 and only credit card as I have loads of business trips coming up and also wanted to buy a load of furniture, white goods, carpets etc.

Refused.

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I tried to increase the credit limit on my 1 and only credit card as I have loads of business trips coming up and also wanted to buy a load of furniture, white goods, carpets etc.

Refused.

Really? And you are minted if I recall correctly?

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BOE wants to keep the tap on but we live in a global economy and I reckon that they will be forced to raise IRs due to external forces - oil prices, strengthening of the dollar etc

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Yes there's still plenty of "cheap" money around, but ultimately where is it from? It is from the international money markets.

It looks like, but not for definate yet, Japan will be seeing higher domestic demand/inflation this would mean a higher domestic requirement for debt and they will need/want to feed this first, I could see a new asset bubble possibly property starting in Japan which would be "pounced upon" by international money as a fresh relatively undebted population awaiting indebtedness.

This same pool of money will be needed by many contries/governments including our own, and as Japan grows more long term Japanese investment will soak up investment capital. The USA will need more and will increase rates if neccessary.

The uk domestic property market, a relatively unimportant economic backwater, will be abandoned as more lucrative investment opportunites emerge. This wont take too long, 5 years is a very short period for the global economy

Soon criteria will change. At present this unused money is lent out at very minimal margins 1%? and by the time the end user (mortgagee) gets it say 4.5%? The lenders are looking for a very safe haven so they want all monies secured against assets, the UK housing market is ideal, so they stipulate say 85% asset cover and anything above this some form of insurance cover must be in place but it has been such a long protracted propery rise lenders have stuck their necks out giving 120% plus working on the principle "its gone up for seven years so whats the likelyhood of it stopping in the next year"

But what happens when house prices stop going up at 25% a year, bad debt rears its head (remember they are gambling on just a 1% return) and there are safer and higher returns to be made elsewhere?

I dont think this change will be noticed as a few grey suited Japanese bankers will make the decision the UK property market has run its course one ordinary wednesday afternoon. (maybe today) They have nothing to lose.

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An interesting story out today on bloomberg, haven't had a chance to find a web based version I'm afraid....

"By Ben Livesey and Jon Menon

April 5 (Bloomberg) -- British banks, including Royal Bank of

Scotland Group Plc and Barclays Plc, were ordered by the antitrust

regulator to take ``urgent action'' to reduce fees on credit cards,

mortgages and checking account overdrafts.

The decision today marks the first time U.K. banks have been

told to cut fees by the Office of Fair Trading, according to Julia

Thompson, spokeswoman for the London-based regulator. It may

threaten about 1 billion pounds ($1.75 billion) in annual bank

earnings, said analysts at Credit Suisse Group in London.

The ruling follows a year long investigation that questioned

whether penalties for late payments on credit cards were justified

based on costs companies suffer when customers default. British

banks are facing a series of probes on charges and fees that may

further hurt earnings."

You would certainly expect the banks to cut back on lax lending practices if they are no longer allowed to charge all of us over the odds to finance those bad debts which result from cheap money supply.

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We havn't seen any real attempt at credit tightening by the banks so far.

No tightening, no contraction of the money supply.

No contraction of the money supply, no bust.

Apparently Barclaycard are refusing over 50% of new applications now.

What is that if not serious credit tightening.

And what about higher unemployment? That's pretty much a cert - won't that be enough to act as a trigger?

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Really? And you are minted if I recall correctly?

Comparatively yes, although it's my wife who earns the money.

Barclaycard wouldn't give a reason. I'll just have to pay cash for the furnishings.

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Credit tightening is happening in a number of ways.

As already mentioned, the cc companies are rejecting non-preferred customers based on their perception of the risk.

A number of cc companies have raised their ir's in the last 4 months.

Tracker mortgages are still very competative but fixed rate deals have edged up marginally in the last couple of months.

As bad debt rises they are all tinkering with the margins, this then compensates for the bad debt. Also as the banks are showing very healthy profits they can absord some of the first effects of the rise in bad debt beyond their tinkering. Remember they have been making a massive profit out of unreal money for a number of years now.

They have to tinker with the margins for a number of reasons, for example, if HSBC got very selective on mortgage products and raised their rates by 1% they wouldn't be likely to get much new business - its called competition. Another reason is if credit was tightened overnight then the shockwaves would blow everything out of the water the following day. Thats not in their interests.

Slowly slowly catchy monkey :)

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Comparatively yes, although it's my wife who earns the money.

Barclaycard wouldn't give a reason. I'll just have to pay cash for the furnishings

.

You can always put a positive balance on the credit card, and then use it.

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Considering the bumper MEW figures we've seen recently a few refused Barcleycards and 'fiddling on the margins' seem a bit uninspiring

I'm leaning towards the stagnation theory, until I see some real balls-out credit tightening.

So far I remain unconvinced...

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I reckon banks will only tighten meaningfully when they start choking on defaults or as somebody else has posted their cheap money supply is drained.

Many mortgage lenders are still relaxing their criteria, simply storing up more trouble IMHO. Deperate attempt to prop the pig up, shoving wedges underneath the stilts that the pig is already propped up on. The longer this goes on the deeper into debt the population becomes and the worse the fallout will be.

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Comparatively yes, although it's my wife who earns the money.

Barclaycard wouldn't give a reason. I'll just have to pay cash for the furnishings.

It's probably because you pay off the balance too regularly.

How can the poor banks make money from selfish people like you, paying off your credit card balance every month? They can't make all of their profits through mis-selling payment protection insurance you know. :P

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It's probably because you pay off the balance too regularly.

How can the poor banks make money from selfish people like you, paying off your credit card balance every month? They can't make all of their profits through mis-selling payment protection insurance you know. :P

That thought did cross my mind, I'd also rung up to complain about poor customer service about a month earlier as they kept amending my address details incorrectly so perhaps I'm blacklisted.

Incidentally whilst I was applying they spent huge amounts of time trying to sell identity theft insurance. A snip at £59 per year. I told them no one would want to be Ignorant Steve. They've obviously identified a new revenue stream. Kept telling me about Harry Hill who apparently had his identity nicked recently.

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It's probably because you pay off the balance too regularly.

How can the poor banks make money from selfish people like you, paying off your credit card balance every month? They can't make all of their profits through mis-selling payment protection insurance you know. :P

They do get a percentage of every transaction you put through.

And they get to play the 'let's increase the limit and hope they don't notice so they overspend and can't pay it off' game.

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They do get a percentage of every transaction you put through.

On cashback cards that offer 0.8% or so they are only just about covering the costs on the transaction - certainly not making very much money on you.

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They do get a percentage of every transaction you put through.

And they get to play the 'let's increase the limit and hope they don't notice so they overspend and can't pay it off' game.

Yeah, The missus was in Zambia last year for work and someone from the hotel took her credit card details and went on a spending spree. When she got back she got a nice letter from the bank saying they'd extended her credit limit because she'd reached it, so they'd spent up to that too.

Some lucky hotel worker in Zambia got to spend £6k on Lloyds.

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So I guess we agree then

No HPC just yet until we see some real action on behalf of the banks to rein in their lending

Why are we even bothering to debate anything else ?

Oil shot up and we saw no crash

Gas shot up and we saw no crash

Manufacturing tanked and we saw no crash

Interest rates shot up and we saw no crash

SIPPS was cancelled and we saw no crash

Unemployment spiked and we saw no crash

In fact things seem to be picking up for the market, as we have seen with recent data

I think it will go on and on, more disappointments for those sitting renting and waiting, until that essential piece clicks into place and we start to see some real action.

Up to then I guess we can all keep kidding each other

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So I guess we agree then

No HPC just yet until we see some real action on behalf of the banks to rein in their lending

Why are we even bothering to debate anything else ?

Oil shot up and we saw no crash

Gas shot up and we saw no crash

Manufacturing tanked and we saw no crash

Interest rates shot up and we saw no crash

SIPPS was cancelled and we saw no crash

Unemployment spiked and we saw no crash

In fact things seem to be picking up for the market, as we have seen with recent data

I think it will go on and on, more disappointments for those sitting renting and waiting, until that essential piece clicks into place and we start to see some real action.

Up to then I guess we can all keep kidding each other

Yup.

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So I guess we agree then

No HPC just yet until we see some real action on behalf of the banks to rein in their lending

Why are we even bothering to debate anything else ?

Oil shot up and we saw no crash

Gas shot up and we saw no crash

Manufacturing tanked and we saw no crash

Interest rates shot up and we saw no crash

SIPPS was cancelled and we saw no crash

Unemployment spiked and we saw no crash

In fact things seem to be picking up for the market, as we have seen with recent data

I think it will go on and on, more disappointments for those sitting renting and waiting, until that essential piece clicks into place and we start to see some real action.

Up to then I guess we can all keep kidding each other

At the end of the day, we all love our homes, and there is a saying "safe as houses".

I personally think there will be a reduction in house prices for sure. But it will be over such a long

period of time, the banks will dress it up as plateauing/inflationary rises etc etc.

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Yup.

Unemployment is accelerating , just look at todays blog.

Give it a few more months and we'll start seeing the effects.

It doesn't happen overnight !!!!

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Unemployment is accelerating , just look at todays blog.

Give it a few more months and we'll start seeing the effects.

It doesn't happen overnight !!!!

Allow me a modest rant... I've been following this site since it first came online and we've all been chasing our tails for 3 years, debating and countering and discussing and arguing and yet nothing of any real worth seems to have happened. According to even the brightest of posters here (Bubb et al) the crash has always been 'just around the corner', yet all conveniently overlook the fact that there is a virtual ocean of cash out there still and nobody has turned off the taps.

The market cooled off, now has picked up again, and might cool off again over 2-3 years for all we know. By that time the Olympics vibe will kick in and we could see further positive sentiment in the UK which might carry us through well nto the next decade ( I mean, who knows, right ?). Are we gonna be logging onto here every day praying for the crash for the next 10-12 years ? I sort of hoped I could delete this site from my favorites list by 2008... but I think that might be wildly optimistic.

THE BIGGEST FACTOR !

NO TIGHTENING, NO CRASH !

REST IS B*LLOCKS !

(but I guess i'll still hang around on here anyway)

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The rises in interest rates from central banks is ultimately a form of credit tightening. But it is at the source and so takes quite some time to filter through.

A bit like digging up a water pipe and wondering how to stop the flow. The quickest way (apart from fixing the pipe which is a bid difficult with the water still flowing) is to turn the nearest upstream tap off. But central banks are instead turning off the rain. Eventually is there's no rain then the water will stop flowing but it will take quite some time and of course if won't only be your broken pipe that dries up but rather, the whole supply. The rises in oil prices etc could be likened to someone taking more water from the same dam. It ultimately hastens the process of emptying your pipe but it's still anything but immediate.

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Allow me a modest rant... I've been following this site since it first came online and we've all been chasing our tails for 3 years, debating and countering and discussing and arguing and yet nothing of any real worth seems to have happened. According to even the brightest of posters here (Bubb et al) the crash has always been 'just around the corner', yet all conveniently overlook the fact that there is a virtual ocean of cash out there still and nobody has turned off the taps.

The market cooled off, now has picked up again, and might cool off again over 2-3 years for all we know. By that time the Olympics vibe will kick in and we could see further positive sentiment in the UK which might carry us through well nto the next decade ( I mean, who knows, right ?). Are we gonna be logging onto here every day praying for the crash for the next 10-12 years ? I sort of hoped I could delete this site from my favorites list by 2008... but I think that might be wildly optimistic.

THE BIGGEST FACTOR !

NO TIGHTENING, NO CRASH !

REST IS B*LLOCKS !

(but I guess i'll still hang around on here anyway)

A house is indeed only worth what the banks are willing to lend you, and I must agree I don't see an end to lax lending at the moment.

Loose lending and high liquidity all tie in with the prediction of rising inflation and commodity prices. I agree it could go on for years but you cannot have such huge gains in property and energy prices without knock-on effects, I have no idea how these will manifest themselves, but I'm sure they will at some point, and it may well be ugly.

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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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