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Realistbear

C M L Lending Figures May Force Gordon's Hand On I R

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http://investing.reuters.co.uk/News/newsAr...L-MORTGAGES.xml

Record mortgages could nudge up interest rates

Fri Jul 21, 2006 7:23 AM BST162
By David Burrows
LONDON (Reuters) - Would-be homebuyers should be careful not to over-borrow on their mortgages, experts warn, as the booming market in home loans becomes the latest factor adding to pressure for an early rise in interest rates.
Record mortgage lending figures may be good news for a resilient housing market and estate agents, but could be the catalyst that forces the Bank of England to act on rates.

IMO, Gordon will resist putting up IR for as long as he can and rely on the slowing US economy to work its way through to our economy in the form of declining exports and consequential rises in the level of employment which will in turn temper wage demands. His gamble is that he can continue to show very low inflation by making sure the "basket" contains the right items. The pressure to hike will come if he gets 3 months in a row of continuing inflation.

The concern over the high levels of borrowing will probably be muted as he will say that it is all to do with people re-mortgaging to avoid possible IR hikes in the near term. He cannot afford a hike in the light of stock market weakness and the dreadful consequences of a long bear market in the City with huge job losses. The brokerages have been doing very well recently on volatility but once the dust settles and a long bear market sets in redundancy notices will be flying and we can expect a return to 1987 with a consequential collapse in house prices to follow on.

My bet is that Gordon is assuming, like his counterpart Ben at the Fed, that the soft landing in HPI has already begun. Gordon is smart enough to know ramping from truth and my bet is that he no more believes houses are flying off the shelves than most of us do on HPC. If he did think HPI was still occuring I honestly believe he would have ordered a hike in IR when the muppets last met.

At the same time, Gordon is mindful of his legacy and the possiblity of ascending to No. 10. His policy: lay low, don't rock the boat and hope Ben got it right.

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Hello Realist Bear - this is your nemesis - the realist bull - can I ask you a question? - why do you doom mongering losers keep banging on about the early nineties crash? - this was not a 'market correction' but a direct consequence of the disasterous government policy known as ERM - maybe you are too young to remember but back in the spooky days of John Major and Norman 'red box' Lamont interest rates were deliberatly ramped up to strengthen the pound - what happened? - widescale recession.

Was this a 'market correction'? - if it was why have prices quadrupled since.

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Anatole - uberbull- Kalotsky is predicting trouble across the pond. Stagflation is being muttered in the corridors of power both here and the states and Brown is not in a position to cut taxes to stimulate the economy (he's plunged further into the red according to today's press). There is a feeling (probably influenced by hope in this little bear's heart) that the UK economy could spiral out of control in a matter of weeks, or it could chug along like this for years. We're all waiting for a trigger - a hike in rates (it wouldn't take much) - a surge in unemployment, the collapse of a hedge fund, oil to rocket in price due to the mid-east crisis. With the government and the consumer maxed out on credit we couldn't absorb any of the above could we?

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Guest wrongmove

But RB, yesterday you were trying to cinvince us that mortgage lending had reached a turining point and was coming down! Surely this would take the pressure of off "Gordon" ?

24 hours is a long time in VISpinland, I guess...

:lol:

And I'm a slightly bearish FTB, BTW !!

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We crashed out of the ERM in '92 and houses did not begin to recover until at least '96. In fact they only reached the 1989 level (adjusted for inflation) in 2002. Of course the world has moved on and things are different this time (I mean that without sarcasm) but the essential problem is still the same. Too many people have borrowed too much leaving them very vulnerable to any change in circumstances - job loss, rise interest rates etc. When you have literally millions of people in that situation then economies get very twitchy and can behave in the strangest of ways. Economics attempts to impose rational theories onto humanity - humanity has always been bonkers and driven by emotion more than anything else. We've had the collective greed and over enthusiasm, let's see how the masses react to collective fear and anxiety.

Question for Realistbear:

You made a lot of waves on this site talking about the forthcoming tsunami as Japan began to raise interesst rates. I confess to getting quite excited myself (though I disliked your imagery). However the change in Japan does not seem to have brought about the immediate and devastating consequences you were predicting/hoping. Are you still convinced that a) Japan will continue to raise rates over the next two years and B) that the impact will be felt keenly on these shores.

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IWS - I've been for a jog this morning and I'm utterly knackered. 2006 is the year to sort out the body and the finances. Neither are behaving at the moment so I thought I'd slip in here and hope to be persuaded that economic armageddon will soon be upon us.

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You made a lot of waves on this site talking about the forthcoming tsunami as Japan began to raise interesst rates. I confess to getting quite excited myself (though I disliked your imagery). However the change in Japan does not seem to have brought about the immediate and devastating consequences you were predicting/hoping. Are you still convinced that a) Japan will continue to raise rates over the next two years and B) that the impact will be felt keenly on these shores.

Regarding part A, Japan, short of falling back into deflation, will continue to raise rates until they reach "normal" levels. The last five years have been freakish. Most pundits here in Tokyo reckon it wil be along the lines of a quarter of a percent every three months.

Edited by i_godzuki

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Thanks i_godzuki Will this put an end to the so called 'carry trade'? Will it edge up interest rates around the whole globe? What's stopping the BoE, or someone else, from resorting to a 0% interest rate in the future? I suppose what I want to learn is whether or not the cheap/free money will definitely dry up at some point. If it doesn't then given our appetite for debt HPI will continue to soar for years ahead.

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Regarding part A, Japan, short of falling back into deflation, will continue to raise rates until they reach "normal" levels. The last five years have been freakish. Most pundits here in Tokyo reckon it wil be along the lines of a quarter of a percent every three months.

Japan runs the risk of backwash - all the cheap money that they printed and loaned the world to artficially inflate other markets (particulalrly land/property values - basically to equalize things and make up for their own stupidity and prevent an even larger rout) will come crashing back on their shores as soon as Japan is seen as a comparatively better place to invest.

Japan could easily get back to a runaway land bubble (India is difficult to invest in, so is China and the Chinese govt. do not want to destroy their increasing productive wealth by trashing it with property speculation).

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Yes I've heard the fear that Japan could actually suffer hyperinflation in the (relatively near) future. God knows what that would mean for the price of a semi-detached house in Preston. This is getting heavy and we haven't even started throwing figures around yet - anyone fancy a game of golf and some Pimms?

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Hello Realist Bear - this is your nemesis - the realist bull - can I ask you a question? - why do you doom mongering losers keep banging on about the early nineties crash? - this was not a 'market correction' but a direct consequence of the disasterous government policy known as ERM

And the reason for the house price falls in countries other than the UK? For example Australia? <_<

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  • 302 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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