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Ash4781

Market Jitters And Your Pocket (bbc)

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http://news.bbc.co.uk/1/hi/business/6953779.stm

MORTGAGES

The wave of mortgage defaults in the US has raised the spectre of similar problems in the UK and cast doubt over how much longer the house-price boom can be sustained.

House repossessions rose 30% in the first six months of 2007 while research by credit rating firm Fitch argued that the UK housing market was among the most over-valued in Europe.

Concerns surround the number of people with variable-rate mortgages, which are particularly sensitive to rising interest rates.

Pressure on people to meet their mortgage payments, particularly in London and the South East, where rising prices have forced many homeowners to borrow up to the hilt to get on the housing ladder, is also a worry.

But experts say lending conditions are much stiffer than in the US, while the market is being underpinned by strong demand, a shortage of new homes and a robust economy.

Recent data showing a fall in inflation, allied to concerns about market instability, means many experts feel the Bank of England will refrain from further rate rises for the time being.

"A further interest rate rise certainly does not look anything like the strong certainty that it did a week or so ago," said Howard Archer, chief economist with Global Insight.

"Much will clearly depend on how inflation, growth and financial markets develop over the coming weeks."

;)

A "robust economy" where a constant stream of people is needed who "borrow up to the hilt" to create a "strong demand". It's a worry.

Will we see a demand shock ?

Edited by Ash4781

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That's about as close as anyone has got to saying we're stuffed...but they still have to pop in how it's all different here. I bought the Sunday Times today and there must be 3 or 4 different 'it's all different here. We've only got a little bit of subprime' etc. Not one mention anywhere of lenders tightening up even though it seems like the most obvious next step.

Give it a week and it will be top story as the subprime mess can't be hidden any more.

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Lending is the USA is now very stringent. In order to get a fairly low mortgage rate you need to have a fantastic credit score. The jumbo loans (> $417) are now very difficult to obtain without a big deposit, good credit score and a good job. IIRC these jumbo loans accounted for 11% of all loans, so there's a massive hit to the system. The Yanks do get tax relief on mortgages which increases income significantly.

The Yanks managed to ship a good deal of their subprime loans abroad. I wonder if the UK was wise enough to do the same?

Edited by Xurbia

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What?!

Not sure what you're saying, refusenik.

Are you challenging the idea that "credit" is identical with "the amount of money circulating in the banking system"? 'Cause that sounds pretty accurate to me. (See "money as debt" video etc)

Or are you startled that the BBC has made this connection?

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