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Realistbear

Just In: Japanese Bank Hikes The I R

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http://freeserve.advfn.com/news_Japan-s-Mi...t_14965640.html

Mizuho Financial Gro Japan's Mizuho Corporate Bank to lift long-term prime lending rate to 2.45 pct
TOKYO (AFX) -
Mizuho Corporate Bank Ltd said it will raise its long-term
prime lending rate to 2.45 pct from 2.10 pct tomorrow, its third increase in
three months.
The long-term prime rate is the interest rate charged on loans of one year
or more to a bank's most creditworthy customers. The rate is a benchmark for
personal, housing and corporate loans.
Mizuho Corporate Bank is the wholesale banking unit of Mizuho Financial
Group Inc.
nozomi.toyama@xfn.com
nt/jm

The Yen carry trade is tightening. The cheap credit that has made Gordon's "Miracle Economy" based on HPI/MEW is going away.

TTRTRates B o E

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Looking ahead to when the UK finally has to succumb to the reality of world IR hikes:

http://today.reuters.com/investing/finance...Y-MORTGAGES.XML

U.S. homebuyers feel pinch of rising mortgage rates

Sun Apr 9, 2006 1:27 PM ET

By Andrea Hopkins

WASHINGTON, April 9 (Reuters) - Vicki Nious joined a nonprofit agency last year to help low-income Americans buy and fix up homes. Instead, with interest rates rising, she's seeing
more clients struggling to pay their mortgage and hang onto their house.
"We've definitely seen an
increase in delinquencies
and even we have a few cases we may consider for foreclosure," said Nious, mortgage services manager for AHC Inc. in Arlington, Virginia. "Many families are having trouble because their adjustable rate mortgages are expiring and they need help."
Like a lot of Americans, many AHC clients got into the housing market in the last few years by taking out adjustable rate mortgages at
extremely low "teaser" rates
, sometimes half that of a traditional 30-year fixed mortgage.
The low rates offered an alluring way for poorer Americans to get into a booming housing market, and many leapt at the chance. About a quarter of outstanding home mortgages nationwide carry adjustable interest rates, and the nation's homeownership rate has climbed to a record 70 percent.

The UK has not had the protection of American style 30 year fixed loans. We are in much worse shape than the US as 100% of our loans are "adjustable" with lock-ins rarely extending beyond 3 years. Many are falling due for adjustment in the UK just as they are in the US.

Tick tock tick tock..... :o

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The Daily Record

15th January 2007

"The real estate crash that began in earnest in the United States quickly spread to other bubble markets around the world. Alan Greenspan's prophetic utterances a year before he handed over to his protege have become a shocking reality as homeowners begin to feel the pain of reality in the form of loans they cannot afford to service. It is true that we should all have seen it coming but the momentum and herd thinking that prices will continue to rise a little longer and "I can always get out" has failed to protect millions from financial ruin.
There are some who blame the Japanese as it was this nation who had flooded the world with excessive liquidity as it could not use the money in its own stagnant economy. When Greenspan's policy of re-inflating the US economy proved to be too successful the consequential interest rate hikes were too little too late. It was a case of the proverbial tanker ship headed toward a collision with the pier not having enough time to take avoiding action because the course cannot be easily re-set.
We should, however, spare some sympathy for our less fortunate cousins in the United Kingdom whose own real estate crash is proving to be far worse than is being felt here. The much touted "Miracle Econopmy" created by Chancellor Gordon Brown kept Brits happy in seemingly ever-rising house price land for over 10 years. It was not just rising interest rates that killed the miracle but the energy crisis and the loss of revenues from North Sea oil. Britain simply could not afford to pay for the indulgent luxuries it had bought with cheap Japanese credit once the interest rates began to return to normal levels."

Sometimes it is good to read ahead and get prepared :) Just a little "prophetic" writing to cheer us all up.

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Interest rates are expected to be hardened globally in 2006 as well as 2007 by most countries.

However, central banks will raise interest rates in way that ensures stable growth rates. Higher interest rates will reduce global liquidity but surplus liquidity will not vanish overnight. It is going to a very slow and steady process. Do not expect bank of Japan to raise interest rates from the present zero percent to one percent in the next three months and jeopardize the Japanese economy.

Edited by 737

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Interest rates are expected to be hardened globally in 2006 as well as 2007 by most countries.

However, central banks will raise interest rates in way that ensures stable growth rates. Higher interest rates will reduce global liquidity but surplus liquidity will not vanish overnight. It is going to a very slow and steady process. Do not expect bank of Japan to raise interest rates from the present zero percent to one percent in the next three months and jeopardize the Japanese economy.

Agreed. But the sooner it starts the sooner I will be able to buy a house at a reasonable price.

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http://freeserve.advfn.com/news_Japan-s-Mi...t_14965640.html

Mizuho Financial Gro Japan's Mizuho Corporate Bank to lift long-term prime lending rate to 2.45 pct
TOKYO (AFX) -
Mizuho Corporate Bank Ltd said it will raise its long-term
prime lending rate to 2.45 pct from 2.10 pct tomorrow, its third increase in
three months.
The long-term prime rate is the interest rate charged on loans of one year
or more to a bank's most creditworthy customers. The rate is a benchmark for
personal, housing and corporate loans.
Mizuho Corporate Bank is the wholesale banking unit of Mizuho Financial
Group Inc.
nozomi.toyama@xfn.com
nt/jm

The Yen carry trade is tightening. The cheap credit that has made Gordon's "Miracle Economy" based on HPI/MEW is going away.

TTRTRates B o E

This is a much more important event than first appears.

Effectively, the big UK longer term money suppliers have just had a 16.66% increase in the cost of their product (money) This probably is the cheapest global source for money?. So, although not high enough to stop relatively cheap mortgages being profitable, it has cut margins.

If this was to happen only a couple more times you would see the cheaper mortgage deals disappear, and if these rates were to go higher still you would see aggresive advertising to get your money at higher interest.

It is possible that within the next year or two that saving rates could see 7% even 8%

So what will mortgage rates be!!!

Edited by Flat Bear

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Since 2003 I had recognised a "bubble" in house prices in the UK and, to be honest, thought a correction would have taken place well before now.

I have read numerous threads on what will be the "trigger" and have pondered what would be the most likely cause or event to indicate the start of the economic downturn/ house price "crash".

I really think the Japanese banks monatary tightening could be it. It will stiffle cash flow to the west for governments, businesses, speculators and ofcourse for individual property purchase/speculation.

Although it seems quite an unimportant sequence of small rises it will have massive global implications. Once the Giant of all cash rich countries slowly wakes up from its very long sleep (over a decade) it will be very hungry and I dont think it will worry if there isnt anything left for us. We have simply been playing with some of the Giants money whilst hes been asleep.

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This is a much more important event than first appears.

Effectively, the big UK longer term money suppliers have just had a 16.66% increase in the cost of their product (money) This probably is the cheapest global source for money?. So, although not high enough to stop relatively cheap mortgages being profitable, it has cut margins.

If this was to happen only a couple more times you would see the cheaper mortgage deals disappear, and if these rates were to go higher still you would see aggresive advertising to get your money at higher interest.

It is possible that within the next year or two that saving rates could see 7% even 8%

So what will mortgage rates be!!!

About 4% as we would then join the Euro!! :lol:

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i personally think the trigger would be this -

if i were to buy a house

so, to do you all a favour, if everyone could chip in some money to my paypal account, say £100 each, i'll put it in a pot and go and buy a house.

then, i'm pretty sure prices will crash! so how about it??

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About 4% as we would then join the Euro!! :lol:

I was going to add how Euroland interest rates would be effected even more as they are starting from a lower point.

Although I think it possible, but not likely, that Gordon could keep rates at 4.5% for the rest of the year, at least 2 x 1/4% raises are a must for the Euro. I would expect a hike as soon as June irrespective of economic outlook.

I think there is some confusion with official base rate and what you can get a mortgage rate at. Are you telling me that currently you get a uk mortgage for say 4.65% and you can get a Euro mortgage for 2.60%?

The bigger financial institutions use the base rate as a guide only. Did you not notice some of the uk Mortgages on offer over the last 3 years? There have been offers as low as 1.99% and there were still a few late last year at under 3%! People were saying there must be some catch and yes they were only open to 1st time buyers say with a 30% deposit for a limited period, but the banks were still making profit (they do not need to trade money at a loss)

So if the banks pay more for their money they WILL sell at a higher price. Thats what they do and they have been making an absolute fortune out of lending money, secured against property as this is their lenders criteria, over the past 6 years. You must have noticed the deluge of advertisments in papers, TV, though the post, infact every avenue has been relentlessly and aggresively used. So why do you think they would spend an absolute fortune in advertising, staff etc? Do you think the banks are doing it out of kindness?

Here is a clue, I found it difficult to get just 3x my salary in 1985 and rate was 2% above BOE base and the Banks profits were not anywhere near last years levels. Extra clue Japan was actually looking for inward investment.

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It will be interesting to watch interest rates(pun intended) rise globally and in what order.

As Japan wakes and raises who will be first? and will it be haphazard or what?

Just for fun

mid 2006

JAPAN OFFICIAL 1%

BEST CARRY TRADE 2.75%

UK 4.5%

EURO 2.75%

US 5.0%
Jan 2007
JAPAN OFFICIAL 1.5%
BEST CARRY TRADE 3.75%
UK 4.75%
EURO 3.0%
US 5.25%
2007 mid
JAPAN OFFICIAL 2%
BEST CARRY TRADE 4.25%
UK 6.5%
EURO 5.0%
US 5.5%
IF
(big if) this were to happen a uk and ********** would be well under way.

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Can someone explain why Japanese IR rising is such a big deal when most other countries are also raising rates?

Surely if they all raise rates it doesn't matter - the carry "window" is still there. I.e. US rate - Jap rate leaves a profit even if Jap IR rises, as US IR is rising also.

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Can someone explain why Japanese IR rising is such a big deal when most other countries are also raising rates?

Surely if they all raise rates it doesn't matter - the carry "window" is still there. I.e. US rate - Jap rate leaves a profit even if Jap IR rises, as US IR is rising also.

I think it's felt that the yen will also rise - whilst in the past the carry-trade aficionados have profited both from the interest rate differential and currency appreciation in future a rise in the Yen would neutalise any profits from interest rate differences.

i.e.

http://www.bloomberg.com/apps/news?pid=100...columnist_pesek

"Realization the trade is moving against investors may send shockwaves through global markets.

It would start slowly with speculators suddenly closing positions that are becoming more expensive: dumping Treasuries, gold, Shanghai real estate, shares in Google Inc. or whatever else they used yen borrowings to bet on. The chain reaction would accelerate once the mainstream media jumped on the story.

If all this sounds far-fetched, think back to late 1998, which offers an example of the damage a panic among carry-traders can do.

Remember 1998

In October of that year, Russia's debt default and the implosion of Long-Term Capital Management LP shoulder-checked global markets. The disorienting period culminated in the yen, which had been weakening for years, surging 20 percent in less than two months.

Suddenly, just about anyone who'd borrowed cheaply in yen rushed for the exits"

Edited by 737

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I think it's felt that the yen will also rise - whilst in the past the carry-trade aficionados have profited both from the interest rate differential and currency appreciation in future a rise in the Yen would neutalise any profits from interest rate differences.

i.e.

http://www.bloomberg.com/apps/news?pid=100...columnist_pesek

"Realization the trade is moving against investors may send shockwaves through global markets.

It would start slowly with speculators suddenly closing positions that are becoming more expensive: dumping Treasuries, gold, Shanghai real estate, shares in Google Inc. or whatever else they used yen borrowings to bet on. The chain reaction would accelerate once the mainstream media jumped on the story.

If all this sounds far-fetched, think back to late 1998, which offers an example of the damage a panic among carry-traders can do.

Remember 1998

In October of that year, Russia's debt default and the implosion of Long-Term Capital Management LP shoulder-checked global markets. The disorienting period culminated in the yen, which had been weakening for years, surging 20 percent in less than two months.

Suddenly, just about anyone who'd borrowed cheaply in yen rushed for the exits"

Its amazing how the reality of rising IR from Japan has so far been ignored by most people (except the bond markets which seem to be rising in preparation). The level of ignorance is precisely why a crash is coming--because few see it coming and fail to react in time like the proverbial deer caught in the headlights.

Its probably true that the professional speculators have been busy unloading interest rate sensitive assetts for some time which may explain the number of "no upward chain" homes on the market recently and the urgency of builders to unload properties with all kinds of incentives. I am expecting a stock sell off before summer and am wondering when to pull down the balance of my positions and go to cash. Long before the top, hopefully! With real estate its not so easy to unload and I fear the downward pressure is already here.

Edited by Realistbear

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Can someone explain why Japanese IR rising is such a big deal when most other countries are also raising rates?

Surely if they all raise rates it doesn't matter - the carry "window" is still there. I.e. US rate - Jap rate leaves a profit even if Jap IR rises, as US IR is rising also.

Because a vast quantity of "cheap" money stems from Japan.

Irrespective of a country's exchange rate, if a "preferential" money supplier such as a large UK mortgage provider can borrow money from Japan at very low rate they can make massive margins selling at or near current UK rates. If this cheap money becomes dearer then the same mortgage provider will put up rates to keep the same margin and if rates become high enough they will have to push up rates and Gordon Brown, the BoE or anyone else could not do anything about it. The BoE would be forced to put up rates to be in sync with global markets and if they dragged their heals UK PLC would have major economic problems with currency rebalancing and ultimatley a sudden massive rise in inflation that had not been seen since Japan had last seen real growth 13 years ago?

So in essence BoJ would be in control and the BoE would have none.

The "reassuring" statements from BoJ that they will only put rates up slowly so dont worry it, has the same ring to it as a dentist saying you wont feel a thing.

Remember when Japan decide to spend they will dwaf our spending, and when UK housing suddenly becomes unsafe (defaulters and falling equity values) they will pull out quickly.

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i personally think the trigger would be this -

if i were to buy a house

so, to do you all a favour, if everyone could chip in some money to my paypal account, say £100 each, i'll put it in a pot and go and buy a house.

then, i'm pretty sure prices will crash! so how about it??

lol

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It will be interesting to watch interest rates(pun intended) rise globally and in what order.

As Japan wakes and raises who will be first? and will it be haphazard or what?

Just for fun

mid 2006

JAPAN OFFICIAL 1%

BEST CARRY TRADE 2.75%

UK 4.5%

EURO 2.75%

US 5.0%
Jan 2007
JAPAN OFFICIAL 1.5%
BEST CARRY TRADE 3.75%
UK 4.75%
EURO 3.0%
US 5.25%
2007 mid
JAPAN OFFICIAL 2%
BEST CARRY TRADE 4.25%
UK 6.5%
EURO 5.0%
US 5.5%
IF
(big if) this were to happen a uk and ********** would be well under way.
Wow
I was quite a long way out on my predictions for uk, BoJ, and Eurozone IRs but OK on US rate.
I have been suprised the most by the very slow rate of increase of the IRs in Japan. Mid 2007 and they are still only .5%
This would have effected the BOE and EU rates which I predicted would accelerate during the first have of the year.
I believe there is a high probability they will raise by .25% in July if not August.
I must admit I am very suprised how this unwinding process has continued to be played out in such slow motion.

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May 25 2006, 12:30 AM Post #11

FLAT BEAR

HPC Regular

Group: Members

Posts: 705

Joined: 4-April 06

From: Reading

Member No.: 4,482

How Far Could Interest Rates Rise?, Does anybody know?

6.5% by end 2007

and then very painful small rises to 7.5% to 8% over following 4 years

This post has been edited by Flat Bear: May 25 2006, 12:31 AM

ok

i seemed to change my mind a month later which might be possible? naw its more likely to end 2007 at 6% so still out

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I think and Im often wrong ;)

but I reckon they are sh1tting themselves too much too raise them too fast, because they have left it TOO long, they have let it get out of control and dont really know what to do cos they know now that their inactivity has unleashed a beast they cannot contain without causeing MASSIVE problems.

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I think and Im often wrong ;)

but I reckon they are sh1tting themselves too much too raise them too fast, because they have left it TOO long, they have let it get out of control and dont really know what to do cos they know now that their inactivity has unleashed a beast they cannot contain without causeing MASSIVE problems.

It's Japanese pension funds and savers that could lose a lot in an unwinding of the carry trade. It's like the house price bubble here.

Politicians fear the inevitable...

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So , as I understand it, a lot of the money that has been borrowed in the UK (and other countries) originates from Japan.

If, we can't pay it back, does this mean that the Japanese ultimately carry the can? If the worst came to the worst, could we write it all off a la third world debt and get out of jail free?

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So , as I understand it, a lot of the money that has been borrowed in the UK (and other countries) originates from Japan.

If, we can't pay it back, does this mean that the Japanese ultimately carry the can? If the worst came to the worst, could we write it all off a la third world debt and get out of jail free?

UK Plc. would finally get liquidated, I suppose.

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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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