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bpw

Double Whammy Hit To Uk House Owners

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We all know it was madness for peolpe to borrow 6 times their family income and yet the 'Phil and Christy' minded contended there were no sub-prime mortgages in the UK. Sub prime merely referes to risk rating as measured by credit rating. It's therefore clear there are millions of risky loans in the UK and many are about to reset to higher rates. A lot higher in some cases.

Before the Fed cut I read many would pay an additional 2-3% - if so a BoE base rate cut will have little influence. Now here is the brilliance of America - they started the ball rolling with bad loans, but amazingly pension funds here in the USA were told in 2003 to avoid Russian Doll investment vehicles that disguised high risk sub prime loans, according to the Torygraph, 70-80% of the liar hedge funds were sold to the EU and Asia. The Americans have therefore managed to pass the risk (and now cost) to countries like Britain which will be hit by a classic boxers one-two. Of course, the Uk is a gutless nation that poodles to Americas whim and for that reason they will do nothing to complain or redress the corrupt buisiness practices here in the USA (Enron, Worldcom, sub-prime the list is long....). The british consumer is therefore faced with failing investments, failing banks, escalating mortgages and of course the original sin of rising inflation.

Looks like good times ahead for HPCers

Edited by bpw

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It was probably our guys that parcelled all this stuff up-the maths would be way beyond the American University taught guys

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The british consumer is therefore faced with failing investments, failing banks, escalating mortgages and of course the original sin of rising inflation.

Didn't the 10bn injection stabilize the banks, and therefore save investments too by perpetuating the bubble? And a rate cut will prevent soaring mortgage rates. So the only danger if all goes smoothly is inflation.

I'm kind of playing devils advocate here. But from what I've read on this site and elsewhere, this is now the horrible reality.

The bubble will continue as long as Brown blows air into it. I hope this isn't right, but I fear it may be.

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Didn't the 10bn injection stabilize the banks, and therefore save investments too by perpetuating the bubble? And a rate cut will prevent soaring mortgage rates. So the only danger if all goes smoothly is inflation.

I'm kind of playing devils advocate here. But from what I've read on this site and elsewhere, this is now the horrible reality.

The bubble will continue as long as Brown blows air into it. I hope this isn't right, but I fear it may be.

... repeat after me, 'WORLD WIDE CREDIT CRUNCH!'

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We all know it was madness for peolpe to borrow 6 times their family income and yet the 'Phil and Christy' minded contended there were no sub-prime mortgages in the UK. Sub prime merely referes to risk rating as measured by credit rating. It's therefore clear there are millions of risky loans in the UK and many are about to reset to higher rates. A lot higher in some cases.

Before the Fed cut I read many would pay an additional 2-3% - if so a BoE base rate cut will have little influence. Now here is the brilliance of America - they started the ball rolling with bad loans, but amazingly pension funds here in the USA were told in 2003 to avoid Russian Doll investment vehicles that disguised high risk sub prime loans, according to the Torygraph, 70-80% of the liar hedge funds were sold to the EU and Asia. The Americans have therefore managed to pass the risk (and now cost) to countries like Britain which will be hit by a classic boxers one-two. Of course, the Uk is a gutless nation that poodles to Americas whim and for that reason they will do nothing to complain or redress the corrupt buisiness practices here in the USA (Enron, Worldcom, sub-prime the list is long....). The british consumer is therefore faced with failing investments, failing banks, escalating mortgages and of course the original sin of rising inflation.

Looks like good times ahead for HPCers

Initially when this whole saga started and we knew the SH!T was going to hit the fan I fully expected London to be up to it's neck in it and was very surprised it was the German banks struggling first. I commented that maybe our guys have earned their money and actually been clever enough (not that you need to be clever!) to avoid this stuff. As they say the silence was deafening from London, the odd murmur but nothing major until NR.

I am begging to revert back to my original assumption that London has bought more than it's fair share of this stuff and we are fooked. At least they can give it to the BOE and exchange it for real money.

I wrote this on the thread below about all the financial in the US are posting better than expected results, they do seem to have been able to pass the buck exceptionally well and if your statement is correct about 2003 it explains that have had plenty of time to wash their hands.

http://www.housepricecrash.co.uk/forum/ind...st&p=780221

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Guest Shedfish
Of course, the Uk is a gutless nation that poodles to Americas whim and for that reason they will do nothing to complain or redress the corrupt buisiness practices here in the USA

not disagreeing with much of what you say, but regards to the above it's our politicians who are the gutless poodles, and we're unable to disagree too much either in public or via the ballot any more*. i believe that the US operates a similar one party system, which they too laughingly refer to as democratic

either way, you chaps got a chimp, us lot got a sloth, and nobody's happy. apart from the chimp, and the glass eyed mossy one

i'm sat here drinking baileys and watching more repeats of Top Gear - for once what they want, and what i want, appear to have coincided for a moment

*maybe that does make us gutless poodles. must get those berets to the laundrette tomorrow...

aw f*ck,yeh. house prices! they're still too high for me

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http://immobilienblasen.blogspot.com/2007/...imco-on-uk.html

Sorry if this has been posted elsewhere already but its a good read on UK house market factors that will double whammy house owners. (quite long)

Higher Income Share for Debt Servicing

But it is not just the spread on mortgage rates that has fallen over the past few years. Lending standards have also declined due to the easing in credit availability. As a result, homebuyers have been able to borrow more money relative to their income while debt-servicing costs are now taking a larger share of consumers’ income. The CML data show that average Loan-to-Income ratios have increased to 3.16x in June, up from 2.4x in 2000. Higher deposits have kept LTV ratios pretty stable at around 80%, so mortgage lenders should be protected if house prices weaken. But increased debt levels have now driven debt-servicing costs as a share of income markedly higher. According to the CML, mortgage interest payments accounted for 17.7% of the average borrower’s income in June, up from 15.4% twelve months ago. This is the highest level since 1992, in spite of the fact that interest rates are about 40% lower than in 1992. Factor in repayment of principal, and debt-servicing costs are within spitting distance of the 1990 high. Chart 4 shows Citigroup’s estimate of total (rather than just mortgages) household debt service relative to disposable income. ...

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not disagreeing with much of what you say, but regards to the above it's our politicians who are the gutless poodles

I have to disagree there. My earlier posts about protests shows me there is little stomach for a fight when it comes to the average poster on here. Thats of course assuming the people here are a representative sample.... which of course is a poor hypothesis but the best i can muster.

I am convinced the UK has lost its way and that the youth are the cause not a symtom. They for some reason seem oblivious to the demographic time bomb and instead have focussed on house price inequity. The two are related.

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bpw - since the FED cut the base rate, mortgage rates have risen, as Mish is talking about here:

http://globaleconomicanalysis.blogspot.com...isses-mark.html

They for some reason seem oblivious to the demographic time bomb and instead have focussed on house price inequity. The two are related.

Precisely. There's more of them selling to less of us, which means higher prices.

* I think you meant "inequality". Maybe "inequity" is something that's coming later ;)

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i'm sat here drinking baileys and watching more repeats of Top Gear - for once what they want, and what i want, appear to have coincided for a moment

Mmm Baileys, so creamy beige, I'm drinking it from a shoe right now.

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not disagreeing with much of what you say, but regards to the above it's our politicians who are the gutless poodles, and we're unable to disagree too much either in public or via the ballot any more*. i believe that the US operates a similar one party system, which they too laughingly refer to as democratic

either way, you chaps got a chimp, us lot got a sloth, and nobody's happy. apart from the chimp, and the glass eyed mossy one

i'm sat here drinking baileys and watching more repeats of Top Gear - for once what they want, and what i want, appear to have coincided for a moment

*maybe that does make us gutless poodles. must get those berets to the laundrette tomorrow...

aw f*ck,yeh. house prices! they're still too high for me

One thing you need to know about the british banking system "mums the word" i've told people this when it all started. Most brokers havent a clue about markets and how they work. Most brokers ie (Cazenove Group , would nt even let them touch my money) are rich kids trying to play the market,when the crap hits the fan they are the 1st to keep it quiet and hoping no one will find out.

What most people should know 3/4 of people in the city dont understand the market well,why because they are'nt interested in the markets but just interested in the money, and get the jobs because they have connections. Most of the fund managers are like kids, i know one that hasnt a clue yet he is a fund manager.

What ive tried to explain to people no matter how intelligent you are if you dont know how too read/understand people actions you should not be working in the market, most of the guys in quant havent had a social life, they dont understand the very basic emotions of human behaviour, they are too much up their own ass.

Theres a few people in here that would make a decent fund manager better than 3/4 of them, the only problem is they dont have the type of educational background needed to get the foot in the door.

Edited by crash2006

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One thing you need to know about the british banking system "mums the word" i've told people this when it all started. Most brokers havent a clue about markets and how they work. Most brokers ie (Cazenove Group , would nt even let them touch my money) are rich kids trying to play the market,when the crap hits the fan they are the 1st to keep it quiet and hoping no one will find out.

What most people should know 3/4 of people in the city dont understand the market well,why because they are'nt interested in the markets but just interested in the money, and get the jobs because they have connections. Most of the fund managers are like kids, i know one that hasnt a clue yet he is a fund manager.

What ive tried to explain to people no matter how intelligent you are if you dont know how too read/understand people actions you should not be working in the market, most of the guys in quant havent had a social life, they dont understand the very basic emotions of human behaviour, the yare too much up their own ass.

Theres a few people in hear that would make a decent fund manager better than 3/4 of them, the only problem is they dont have the type of educational background needed to get the foot in the door.

I don't agree with much of what you post, but in this you are spot on.

I'm in Sydney at the moment and sat next to a Chief Economist for a major fund on the way over.

We had some very interesting chats and came to much the same conclusions about the lack of market understanding by many participants.

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I don't agree with much of what you post, but in this you are spot on.

I'm in Sydney at the moment and sat next to a Chief Economist for a major fund on the way over.

We had some very interesting chats and came to much the same conclusions about the lack of market understanding by many participants.

If you dont agree with some of my posts, please do say so, because i do like to know if iam wrong or if some one has different view from mine, so please do say so, i'll appreciated it a lot, this goes for anyone else. :)

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Didn't the 10bn injection stabilize the banks, and therefore save investments too by perpetuating the bubble? And a rate cut will prevent soaring mortgage rates. So the only danger if all goes smoothly is inflation.

I'm kind of playing devils advocate here. But from what I've read on this site and elsewhere, this is now the horrible reality.

The bubble will continue as long as Brown blows air into it. I hope this isn't right, but I fear it may be.

the more he blows the more it will inflate.

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The mortgage resets in America are much higher than here in the UK.

Nobody with a half a financial braincell should reset to SVR rate here as there are many cheap mortgages out there and I have not seen them in decline since the so called credit crunch (as yet). When your mortgage deal runs out you remortgage to another cheap rate.

Some of the overpriced new builds (this is the minority of new builds - most are in positive equity) are in negative equity but apart from them I don't see any reason why people can't remortgage in the UK compared to the US where they can't re finance to another cheap deal because of negative equity.

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The mortgage resets in America are much higher than here in the UK.

Nobody with a half a financial braincell should reset to SVR rate here as there are many cheap mortgages out there and I have not seen them in decline since the so called credit crunch (as yet). When your mortgage deal runs out you remortgage to another cheap rate.

Some of the overpriced new builds (this is the minority of new builds - most are in positive equity) are in negative equity but apart from them I don't see any reason why people can't remortgage in the UK compared to the US where they can't re finance to another cheap deal because of negative equity.

Sadly NHPC you have been suckered in by the mortgage industry. These “cheap deals” end up having a APR similar to standard variable once all the fees and cost are amortized across the period you secure your cheap rate for. However the reason it seems cheap is you can add the fees to the mortgage making the payment still affordable. This will still end up having the same effect you point out of helping people keep repayments low and staying in their house. It is just another way the mortgage industry over here have kept HPI going and to make even more money from customers. In the real world it is costing them just about the same amount but we do not live in the real world sadly which is off course the problem!!!

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The mortgage resets in America are much higher than here in the UK.

Nobody with a half a financial braincell should reset to SVR rate here as there are many cheap mortgages out there and I have not seen them in decline since the so called credit crunch (as yet). When your mortgage deal runs out you remortgage to another cheap rate.

Not so sure about this. My GF took out a 12x Salary Self Cert loan (its a long story and she didn't have the benefit of the HPC collective advice at the time) with NR which resets early next year. Somehow I think she will have problems refinancing that one to a "cheap rate deal" if at all. A colleague is also in a similar situation with a 100+% IO deal taken out with HSBC at 6x Salary. He was assured by HSBC at the time that it was OK because it was affordable. Given a mild correction and his place has not increased in value he will soon be looking for another 100%+ deal. If he can get one it will be costing him around 30 - 50% more.

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