Daily Express Headline Thursday 17th May

[Guest Charlie The Tramp]

Prices fall but no mercy on mortgages.

I am getting worried about the Daily Express.

[Smell the Fear]

Is that referring to falling house prices? Where?

[music man]

'Prices fall but no mercy on mortgages.'

Not very subtle.

The sheeple are being programmed - a chap said to me yesterday, 'I've been through this before and IR's went to 15% yadayadayada.

The sheeple are going to blame the BTL brigade - which is his opinion the cause of this and they may be the scapegoat. As was the selling of council houses with Maggie. He made sense to me.

LMFAO

Edited May 16, 2007 by music man

[Waiting Patiently]

Here it is in all it's glory

Tomorrow's FT front page also leads on further interest rate rises.

[Waiting Patiently]

Oh dear

[ca-uk]

i guess the 'prices go down' bit relates to inflation being lower than 3.1% rather than house prices

[Jonnybegood]

Will higher IR actually be a good thing, Yes its good for savings (Although many banks do not pass on the rate change) but will higher rates suddenly cause the market to head in reverse.

I think it will lead to a very quiet market for the next year or so, For prices to drop all involved in the chain need to drop their price, BTL may drop their prices to get out but many will hold out in hope as many will sit and wait to see what happens, A case of who makes the first move and caves in.

FTB are still going to find affordability hard with higher IR even if prices do fall, Those looking to move up the ladder are more than ever going to be worried taking on more debt with rising IR and may stay put a little longer, Like I say unless the chain drops the price all along the line then prices will go nowhere.

[MarkG]

Like I say unless the chain drops the price all along the line then prices will go nowhere.

If builders can't sell their newbuild 'executive apartments', they'll make big price cuts to get rid of the damn things; they're making masses of profit anyway, so they can happily undercut the rest of the market to get sales. That seems to have been one of the drivers for price drops in America (you can't sell your BTL flat for 350k if the builder is selling new ones for 200k), and will likely be the same here.

[dnd]

http://goldnews.bullionvault.com/sterling_central_banks

But the Pound is set to fall hard, according to two big US investment banks. Goldman Sachs says the Pound is 13% over-valued on a trade-weighted basis. Lehman Brothers are gloomier still. "I'm not saying that things will be terrible, but they will feel much worse," warns their chief UK economist, Alan Castle. He sees Sterling falling to $1.82 next year, before sinking to $1.68 by Christmas 2008.

hmm, this should push general inflation up....even further....

wonder if this is assuming ir will still continue to rise?

expect to see some lovely defaulting 2008 thanks to crippling ir, general inflation and taxation...

Edited May 17, 2007 by dnd

[Guest The_Oldie]

I believe Evan Davies said on BBC News this evening that he wouldn't be surprised to see interest rates at 6% by the end of this year. A .5% followed by two .25% rises.

[sunama]

If builders can't sell their newbuild 'executive apartments', they'll make big price cuts to get rid of the damn things; they're making masses of profit anyway, so they can happily undercut the rest of the market to get sales. That seems to have been one of the drivers for price drops in America (you can't sell your BTL flat for 350k if the builder is selling new ones for 200k), and will likely be the same here.

In which case, rather than take such a big loss, the BTL landlord will continue to let out his property and hold out for the long term. Surely this is common sense.

A colleague I work with has a BTL property which he bought in 2004, IO mortgage. He stated to me that all these interest rate rises wont make him nervous until they hit around 8% or thereabouts. At this point, he will be subsidising the mortgage by around £200pm. He doesnt mind subsidising the mortgage because "he is in it for the long term capital gain".

[MarkG]

In which case, rather than take such a big loss, the BTL landlord will continue to let out his property and hold out for the long term. Surely this is common sense.

Why would anyone with common sense hang onto a declining asset where the rent didn't even pay the mortgage?

He doesnt mind subsidising the mortgage because "he is in it for the long term capital gain".

Easy to say when he's making 2k a month in a boom. Remind him of it when he's losing 2k a month in a crash.

If you're really in BTL for the 'long term', you'd be crazy not to sell up and then buy back in at a much lower price.

[Guest Bart of Darkness]

"Prices fall"

Really, where? Oh, I think Apple have cut the price of their iPod Shuffle. That must be it.

Ahhh, it's the Getsworse, why do I even care?

Night all.

[Krackersdave]

Prices fall but no mercy on mortgages.

I am getting worried about the Daily Express.

Cor! - I like the headline about Harry! One part of me thinks - "poor bugger - I bet he didn't even want to be in the army"

The other part thinks he should get his skinny backside out to Basra and play dodge the sniper with the rest of his unit.

Sorry - not a royalist here I'm afraid.

Then again he did seem to be rather taken with uniforms before did he not?

[PeteHK]

Why would anyone with common sense hang onto a declining asset where the rent didn't even pay the mortgage?

Easy to say when he's making 2k a month in a boom. Remind him of it when he's losing 2k a month in a crash.

If you're really in BTL for the 'long term', you'd be crazy not to sell up and then buy back in at a much lower price.

Agreed, I guess some may be put off by exit (CGT, EA fees) and re-entry (Stamp duty) fees ...

[Nelly]

Why would anyone with common sense hang onto a declining asset where the rent didn't even pay the mortgage?

Easy to say when he's making 2k a month in a boom. Remind him of it when he's losing 2k a month in a crash.

If you're really in BTL for the 'long term', you'd be crazy not to sell up and then buy back in at a much lower price.

Your posts allways make a lot of sense mate.

[Frank Hovis]

Will higher IR actually be a good thing, Yes its good for savings (Although many banks do not pass on the rate change) but will higher rates suddenly cause the market to head in reverse.

I think it will lead to a very quiet market for the next year or so, For prices to drop all involved in the chain need to drop their price, BTL may drop their prices to get out but many will hold out in hope as many will sit and wait to see what happens, A case of who makes the first move and caves in.

FTB are still going to find affordability hard with higher IR even if prices do fall, Those looking to move up the ladder are more than ever going to be worried taking on more debt with rising IR and may stay put a little longer, Like I say unless the chain drops the price all along the line then prices will go nowhere.

Prices will go nowhere - for a period. As happened last time.

If people think the price of their house may have fallen they are unlikely to rush to crystallise that loss but instead will hold off selling in the hope that prices will come back up. After the initial slack period of number of necessary or forced sales will make it very clear that proces won't come back up and will continue to fall so there will be a rush to market.

The slack period this time will be shorter than previously because the forced sales will be much higher volume than the last crash because of the number of over-stretched BTL who have to now justified a small subsidy to the mortgage on the grounds they're in it for the long term.

[Levy process]

If you're really in BTL for the 'long term', you'd be crazy not to sell up and then buy back in at a much lower price.

Absolutely right. This point isn't made often enough. The 'in it for the long term' excuse given as a response in which one agrees that one's asset is likely to fall in value is nothing short of muddle beaded folk knowledge. It is offered in the spirit of being equivalent to 'I believe my asset will fall in value now but rise again in the future'. If one really believes that will be the future price profile, the logical response is likely to be to instantly sell and plan to buy back in the future at the bottom. To simultaneously predict a trough in an asset price and claim the best course of actions is to hold the asset through the putative trough is often bordering on idiocy. People quote this 'long term' mantra as though it were some sort of shrewd investment knowledge. But often it is idiocy. There can of course be other factors which offset a loss of certain sizes making it more profitable to endure a period of asset value reduction rather than endure the cost of a sale and a further purchase, such as taxes and transaction costs. But that doesn't apply to a lot of the idiots who use the 'long term' argument as a security blanket as they blunder on with their ill conceived plans.

If people are using the long term argument as justification for holding an asset they believe is going to endure a fall in value, ask them to show the calculation that shows that the trade off is such that the costs incurred in selling and buying at the bottom outweigh the gains. If they can't show you that bit of maths, then their 'long term' argument is jibba jabba.

Edited May 17, 2007 by Levy process

[I'M WITH STUPID]

The slack period this time will be shorter than previously because the forced sales will be much higher volume than the last crash because of the number of over-stretched BTL who have to now justified a small subsidy to the mortgage on the grounds they're in it for the long term.

Yawn... price plummets in town centre penthouses ain't gonna cause three bed suburban semis to crash

you might be in for a bargain if you fancy a penthouse in the centre of Leeds (but like everyone else I suspect you don't)

[Swipe]

That's blown it now then. When has a daily Express front page headline ever come true? Normally the complete opposite happens. Expect rate cuts from here onwards. :angry:

[RichB]

Oh dear

I particularly like the image that accompanies it.... is that a MEWer waving goodbye to his nice new car?

[PeteHK]

Yawn... price plummets in town centre penthouses ain't gonna cause three bed suburban semis to crash

you might be in for a bargain if you fancy a penthouse in the centre of Leeds (but like everyone else I suspect you don't)

Yes, but who knows how many owners of 3-bed suburban semis have MEWed to finance these BTLs? Domino effect?

[Bug16]

I particularly like the image that accompanies it.... is that a MEWer waving goodbye to his nice new car?

[red]

i guess the 'prices go down' bit relates to inflation being lower than 3.1% rather than house prices

I think you may be right, although prices won't 'go down', they'll just stop going up as fast.

[sikejsudjek]

In which case, rather than take such a big loss, the BTL landlord will continue to let out his property and hold out for the long term. Surely this is common sense.

A colleague I work with has a BTL property which he bought in 2004, IO mortgage. He stated to me that all these interest rate rises wont make him nervous until they hit around 8% or thereabouts. At this point, he will be subsidising the mortgage by around £200pm. He doesnt mind subsidising the mortgage because "he is in it for the long term capital gain".

In bubbles, what sheeple tend to do is buy at the top and sell at the bottom. How do they achieve this ? By holding on for the long term, waiting too long to sell, panicing, and then selling low. Happens all the time in every bubble. Once house prices crash they could take 20 years to recover. That 'long term capital gain' might cost him a lot more in extra interest payments while he waits. My bet is that most BTL's will sell out once the market is near bottom. The same mass sentiment that got them to buy high, works to make them sell low. Idiotic I know .....