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I Know The Bulls Dont Want To Hear It But.

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just a couple of points. hearing about how interest rates soared with the erm fiasco. well the market started to turn dramatically in 1989, three years prior to the erm business.

also i was around the the similarities are so close. we had all the articules about how parents were helping their kids. all the offers of free furniture. 100 pct mortgage deals. fees paid. prices ever go upwards. do whatever you can to get on the ladder. oh and not forgetting the latest. friends sharing. there is a shortage of properties, immigrents, the list goes on.

its simple. the economic climate has been cheap money and easy lending, and cheap oil. now thats coming to an end. the economic climate changes. and economies deal with it. so what if prices dont drop. the whole housing and property market is based on them going up. and if they dont do that ,then why buy. its far far cheaper to rent. and that is part of the new economic climate. a whole generation of younger people are going to rent. so in years to come when everyone comes to sell their pension pots of property, think carefully who is going to buy it from them.

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just a couple of points. hearing about how interest rates soared with the erm fiasco. well the market started to turn dramatically in 1989, three years prior to the erm business.

also i was around the the similarities are so close. we had all the articules about how parents were helping their kids. all the offers of free furniture. 100 pct mortgage deals. fees paid. prices ever go upwards. do whatever you can to get on the ladder. oh and not forgetting the latest. friends sharing. there is a shortage of properties, immigrents, the list goes on.

its simple. the economic climate has been cheap money and easy lending, and cheap oil. now thats coming to an end. the economic climate changes. and economies deal with it. so what if prices dont drop. the whole housing and property market is based on them going up. and if they dont do that ,then why buy. its far far cheaper to rent. and that is part of the new economic climate. a whole generation of younger people are going to rent. so in years to come when everyone comes to sell their pension pots of property, think carefully who is going to buy it from them.

Yes Hedi, I agree with quite a lot of that. I'm 'only' 26 years old, so don't remember the last correction/crash but I have read Fred Harrison's book about a depression coming in 2010 and it all looks plausible - both the scenario and the time frame.

If you agree with him that these things go in 18 year cycles I guess we're in 1988, next year 1989 etc. Do posters here think that's we are?

Of course the coming crash will not be an exact repeat of the last one as history never repeats itself exactly but certain strands of human behaviour are always prevelent in the market like greed and fear.

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I Know The Bulls Dont Want To Hear It But.

But it's all over - there really are no upward pushes in the market.

Even the Central London market so oft quoted in the surging figures is having pressure from the Hong Kong tax issues being raised at last.

I'm sorry about the facts - but it will take time. The analagy of the 'Oil tanker' is rife yet it still takes time.

All I see in World, Political and Business news is a downward trend. Can anyone seriously give me a considered viwpoint that this is not the case.

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I Know The Bulls Dont Want To Hear It But.

But it's all over - there really are no upward pushes in the market.

Even the Central London market so oft quoted in the surging figures is having pressure from the Hong Kong tax issues being raised at last.

I'm sorry about the facts - but it will take time. The analagy of the 'Oil tanker' is rife yet it still takes time.

All I see in World, Political and Business news is a downward trend. Can anyone seriously give me a considered viwpoint that this is not the case.

I agree with you 100%. But playing devils advocate, what about if the FED pump the world economy full of liquidity (ie 1% IRs) like they did after the Asian crisis, the hedge fund collapse crisis, the dot com bust and 9/11?

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just a couple of points. hearing about how interest rates soared with the erm fiasco. well the market started to turn dramatically in 1989, three years prior to the erm business.

also i was around the the similarities are so close. we had all the articules about how parents were helping their kids. all the offers of free furniture. 100 pct mortgage deals. fees paid. prices ever go upwards. do whatever you can to get on the ladder. oh and not forgetting the latest. friends sharing. there is a shortage of properties, immigrents, the list goes on.

its simple. the economic climate has been cheap money and easy lending, and cheap oil. now thats coming to an end. the economic climate changes. and economies deal with it. so what if prices dont drop. the whole housing and property market is based on them going up. and if they dont do that ,then why buy. its far far cheaper to rent. and that is part of the new economic climate. a whole generation of younger people are going to rent. so in years to come when everyone comes to sell their pension pots of property, think carefully who is going to buy it from them.

Interest rates soared from 1988; that is why the market turned sharply <_<

The base rate stood at 8.8750pc in February 1988, and reached 11.8750 by August that year. In November it increased again to 12.8750pc. By October 1990 it had reached 14.8750pc. 1993, in contrast, saw rates dip from 5.8pc to 5.3pc over the course of the year. (source BoE)

Does that make it clear? Rates soared. At the moment we have seen an increase to 4.75pc; the expectation is that there will be another increase to 5pc, before inflation starts to tail off in 2007 (city expectations, not just mine). Now, does anyone here really expect interest rates to increase as sharply as in the 1989/1990 period?

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Interest rates soared from 1988; that is why the market turned sharply <_<

The base rate stood at 8.8750pc in February 1988, and reached 11.8750 by August that year. In November it increased again to 12.8750pc. By October 1990 it had reached 14.8750pc. 1993, in contrast, saw rates dip from 5.8pc to 5.3pc over the course of the year. (source BoE)

Does that make it clear? Rates soared. At the moment we have seen an increase to 4.75pc; the expectation is that there will be another increase to 5pc, before inflation starts to tail off in 2007 (city expectations, not just mine). Now, does anyone here really expect interest rates to increase as sharply as in the 1989/1990 period?

Don't forget the loss of double MIRAS relief during 1988. This reduced MIRAS from £60k to £30k for couples.

This caused a huge rush to buy property in 1988 in order to beat the mortgage interest relief deadline and this added to the bubble.

According to the bears it's been '1989' for about three years now...

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Don't forget the loss of double MIRAS relief during 1988. This reduced MIRAS from £60k to £30k for couples.

This caused a huge rush to buy property in 1988 in order to beat the mortgage interest relief deadline and this added to the bubble.

According to the bears it's been '1989' for about three years now...

Also, mortgage repayment affordability was a lot worse than it is today. If you're making cxomparisons with 1989, there's still headroom for further price rises. Personally, I don't think we'll have any more than 3-5% price rises for a while yet. And no crash.

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Don't forget the loss of double MIRAS relief during 1988. This reduced MIRAS from £60k to £30k for couples.

This caused a huge rush to buy property in 1988 in order to beat the mortgage interest relief deadline and this added to the bubble.

According to the bears it's been '1989' for about three years now...

Good points; quite agree :)

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A few more issues between now and the 90s is the attitude about saving for the future, i.e. pensions. Now most young people don't have a pension, and don't care. Whereas (i've been told) it was still the done thing to have a pension in the 90s.

Also, children. The couples I know who bought (aged mid 20s) would no way be able to afford to have kids.

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A few more issues between now and the 90s is the attitude about saving for the future, i.e. pensions. Now most young people don't have a pension, and don't care. Whereas (i've been told) it was still the done thing to have a pension in the 90s.

Also, children. The couples I know who bought (aged mid 20s) would no way be able to afford to have kids.

The mass-popularity and availability of BTL is the major difference between now and the 80/90s. If prices dipped, BTLers would soon rush in to support the market. This never happened before.

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Interest rates soared from 1988; that is why the market turned sharply <_<

The base rate stood at 8.8750pc in February 1988, and reached 11.8750 by August that year. In November it increased again to 12.8750pc. By October 1990 it had reached 14.8750pc. 1993, in contrast, saw rates dip from 5.8pc to 5.3pc over the course of the year. (source BoE)

Does that make it clear? Rates soared. At the moment we have seen an increase to 4.75pc; the expectation is that there will be another increase to 5pc, before inflation starts to tail off in 2007 (city expectations, not just mine). Now, does anyone here really expect interest rates to increase as sharply as in the 1989/1990 period?

So rates increased by... what about 30% between Feb 1988 and Aug 1988.

An increase in rates by the same percentage from a starting point of 4.5 would put us on 5.85%.

Considering the amount of personal debt and the fact that IO mortgages are in vogue, the answer to your question is "Yes, quite possibly...."

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So rates increased by... what about 30% between Feb 1988 and Aug 1988.

An increase in rates by the same percentage from a starting point of 4.5 would put us on 5.85%.

Considering the amount of personal debt and the fact that IO mortgages are in vogue, the answer to your question is "Yes, quite possibly...."

On a 25 year repayment mortgage (still very much the standard) then the 1988 hikes take a £100,000 mortgage monthly payment from £839 to £1281, an increase of 53%. Going from 4.5% to 5.85% takes the repayment from £562 to £643, an increase of 14%. Not really comparable scenarios...

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On a 25 year repayment mortgage (still very much the standard) then the 1988 hikes take a £100,000 mortgage monthly payment from £839 to £1281, an increase of 53%. Going from 4.5% to 5.85% takes the repayment from £562 to £643, an increase of 14%. Not really comparable scenarios...

Absolutely right. Not many people leveraged themselves up to the maximum they could borrow, when IRs fell, so the comparisons that people draw with respect to the percentage increase in IRs is invalid, and often mis-used as an argument by Bears. A few recent buyers would be hit as suggested, but these are too few in number to affect the market.

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Good stuff !

ERM, MIRAS failures and the like are bullet points of a tightening economic cycle, Just the straws that broke the camels back; Tipped the scales etc.

Indeed a capitalist economy is punctuated by boom and bust cycles.

GB's missreading of the current climate has already led him to U-Turn various ill thought out policies and there's more to come.

It's all good fun !

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On a 25 year repayment mortgage (still very much the standard) then the 1988 hikes take a £100,000 mortgage monthly payment from £839 to £1281, an increase of 53%. Going from 4.5% to 5.85% takes the repayment from £562 to £643, an increase of 14%. Not really comparable scenarios...

And your info is from??? A circa 30% increase in base rate equating to a 53% increase in loan costs for a repayment mortgage? Link please.

Of course it's not comparable - I was comparing base rates purely. Apples and apples please ;)

Are repayment mortgages the norm for purchases in the last 3 years? The bulls always seem to quote IO mortgages so I just assumed they were the norm now. I always believe the bulls as they appear to be quite knowledgeable... B)

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A few more issues between now and the 90s is the attitude about saving for the future, i.e. pensions. Now most young people don't have a pension, and don't care. Whereas (i've been told) it was still the done thing to have a pension in the 90s.

Also, children. The couples I know who bought (aged mid 20s) would no way be able to afford to have kids.

I think if people had pensions i was due to good work place provision, not a culture of pensions savings. A bigger difference between today and the 1990's is the level of consumer debt, and the exposure individuals have to a loss of income.

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Absolutely right. Not many people leveraged themselves up to the maximum they could borrow, when IRs fell, so the comparisons that people draw with respect to the percentage increase in IRs is invalid, and often mis-used as an argument by Bears. A few recent buyers would be hit as suggested, but these are too few in number to affect the market.

Hey Spartacus - you found a friend! :lol:

Sorry CO - your argument simply doesn't stack up. So people people aren't interested in the %ge amount their repayments have gone up? Strange that %ges are used to measure increases in CPI, RPI etc etc.

A few recent buyers would be hit and these are too few to affect the market? We'll see about that won't be? It's only the people who are selling and buying that actually set the market - this is always forgotten by bulls when they start to trot out "but I'm in it for the long term.... blah blah blah...."

But I'm sure the mortgagees coming off their 3 year fixed rates that were taken out in 2003 will not be too happy.

:o

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And your info is from??? A circa 30% increase in base rate equating to a 53% increase in loan costs for a repayment mortgage? Link please.

Of course it's not comparable - I was comparing base rates purely. Apples and apples please ;)

Are repayment mortgages the norm for purchases in the last 3 years? The bulls always seem to quote IO mortgages so I just assumed they were the norm now. I always believe the bulls as they appear to be quite knowledgeable... B)

I did the numbers myself here using the highest and lowest rates given in each period - sorry I misunderstood your post. The comparable numbers then are a 26% rise in repayments in 1988 vs a 14% rise now. Still a big difference.

I'll be honest, I don't actually know what proportion of mortgages are repayment vs. IO at the moment. Does anyone know any sources?

Edited by IamSpartacus

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Sorry CO - your argument simply doesn't stack up. So people people aren't interested in the %ge amount their repayments have gone up? Strange that %ges are used to measure increases in CPI, RPI etc etc.

Read what I said for goodness sake! I said there weren't enough over-leveraged people to have an effect, not that people weren't interested in their repayments. How on earth did you reach that interpretation???

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I did the numbers myself here using the highest and lowest rates given in each period (so more than 30% overall). The point is that on a repayment mortgage the interest portion of the debt is much lower when interst rates are low, so a rise has proportionally less effect.

I'll be honest, I don't actually know what proportion of mortgages are repayment vs. IO at the moment. Does anyone know any sources?

<a href="http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml" target="_blank"></a>

Thanks Toga boi ;)

I think the important bit is to find out how many people have leveraged themselves to the max with IO mortgages. A (not very!) educated guess - I would say this amount has increased dramatically in the past 5 years...

Cheers!

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Hey Spartacus - you found a friend! :lol:

Sorry CO - your argument simply doesn't stack up. So people people aren't interested in the %ge amount their repayments have gone up? Strange that %ges are used to measure increases in CPI, RPI etc etc.

A few recent buyers would be hit and these are too few to affect the market? We'll see about that won't be? It's only the people who are selling and buying that actually set the market - this is always forgotten by bulls when they start to trot out "but I'm in it for the long term.... blah blah blah...."

CO ain't no friend of mine... :lol: I was about to point out the same fallacy of small numbers of extra sellers not having a big impact on a market with very low numbers of buyers and sellers...

Thanks Toga boi ;)

I think the important bit is to find out how many people have leveraged themselves to the max with IO mortgages. A (not very!) educated guess - I would say this amount has increased dramatically in the past 5 years...

Cheers!

Thats ok - I misunderstood your original post anyway, so see my edited reply for corrected numbers. Oops.

I'm sure there must be someone on here with sources for that sort of information... anyone?

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A few recent buyers would be hit and these are too few to affect the market? We'll see about that won't be?

:o

We don't need to see. The same argument was put forward in 2003 yet IRs rose from 3.5% to 4.75% without beleagured buyers causing a market crash. If you're right, why didn't it happen then?

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The mass-popularity and availability of BTL is the major difference between now and the 80/90s. If prices dipped, BTLers would soon rush in to support the market. This never happened before.

Sure, BTL has had a major impact. But ALL the people who tell me to invest in property (after me saying I can't afford to buy a home to live in), is because it will go up in value. How many of those won't buy if they were falling.

I think BTL has increased the vulnerability of the market, last time when values fell most home owners didn't care. I think most BTLers will care this time.

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We don't need to see. The same argument was put forward in 2003 yet IRs rose from 3.5% to 4.75% without beleagured buyers causing a market crash. If you're right, why didn't it happen then?

It doubtless made the property market more fragile, unless you're suggesting that IRs have no effect on the market. If that had been accompanied by a recession or an external shock such as high oil prices that might have been enough to tip the balance.

Not saying it will happen this time, I just think that you can't argue that raising IRs doesn't increase the probability of house prices dropping.

Edited by IamSpartacus

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Sure, BTL has had a major impact. But ALL the people who tell me to invest in property (after me saying I can't afford to buy a home to live in), is because it will go up in value. How many of those won't buy if they were falling.

I think BTL has increased the vulnerability of the market, last time when values fell most home owners didn't care. I think most BTLers will care this time.

I'm not so sure. Look at how BTLers came back to the market in Jan 06, following 15 months of falling prices (as per Hometrack)

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  • 339 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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