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House Price Crash Forum

Accept It - The Force Is Too Great


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First the prediction:

Interest rates will be cut today and the housing market will take off again straight after Christmas - exactly as it did in 2006.

The government and banks are not going to allow a little inconvenience like a credit crunch to stand in the way. Look at the US - a government imposed 5 year freeze on mortgage rates! Seems they can do anything they want.

Governments are the ultimate short termists. We're half way through a term - they are not going to allow a housing crash and recession spoil their chances of re-election. They will do anything to avoid this. If the BOE do not play ball - Mervyn will go. As sure as night follows day. Then the stooges will do as they are told. The media won't make an issue because the media, to a man, are lined up with the property interests.

So you're lined up against the government, the banks, the media and most of the people in this country.

They will allow inflation to rise and they will continue to lie about it. And they'll inject whatever liquidity they need to to keep the market going. Where will they get the money from? Who knows where governments and central banks get their money from?

If they say they have it, they have it! That is the nature of banking.

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Inflation now will cripple people's ability to pay huge sums for overpriced property. Even a few 1/4 point cuts will not address or rebalance their finances now, but say 20/30% inflation will tip their budgets over the edge. Non-discretionary spending and a huge army of temp jobs reliant on this expenditure will collapse.

There is no free lunch and a very expensive lunch will shut down a large proportion fo the takeaway economy.

http://www.telegraph.co.uk/news/main.jhtml.../08/ntax108.xml

Disposable income at lowest level in 10 years

By Harry Wallop, Consumer Affairs Correspondent

Last Updated: 1:52am BST 08/10/2007

Disposable income is at its lowest level for a decade, as taxes, housing costs, phone bills and travel expenses eat into salaries, researchers says.

Edited by OnlyMe
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First the prediction:

Interest rates will be cut today and the housing market will take off again straight after Christmas - exactly as it did in 2006.

The government and banks are not going to allow a little inconvenience like a credit crunch to stand in the way. Look at the US - a government imposed 5 year freeze on mortgage rates! Seems they can do anything they want.

Governments are the ultimate short termists. We're half way through a term - they are not going to allow a housing crash and recession spoil their chances of re-election. They will do anything to avoid this. If the BOE do not play ball - Mervyn will go. As sure as night follows day. Then the stooges will do as they are told. The media won't make an issue because the media, to a man, are lined up with the property interests.

So you're lined up against the government, the banks, the media and most of the people in this country.

They will allow inflation to rise and they will continue to lie about it. And they'll inject whatever liquidity they need to to keep the market going. Where will they get the money from? Who knows where governments and central banks get their money from?

If they say they have it, they have it! That is the nature of banking.

Im sure that is what theyve got planned, latest fad from America so it should be good.

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First the prediction:

Interest rates will be cut today and the housing market will take off again straight after Christmas - exactly as it did in 2006.

The government and banks are not going to allow a little inconvenience like a credit crunch to stand in the way. Look at the US - a government imposed 5 year freeze on mortgage rates! Seems they can do anything they want.

Governments are the ultimate short termists. We're half way through a term - they are not going to allow a housing crash and recession spoil their chances of re-election. They will do anything to avoid this. If the BOE do not play ball - Mervyn will go. As sure as night follows day. Then the stooges will do as they are told. The media won't make an issue because the media, to a man, are lined up with the property interests.

So you're lined up against the government, the banks, the media and most of the people in this country.

They will allow inflation to rise and they will continue to lie about it. And they'll inject whatever liquidity they need to to keep the market going. Where will they get the money from? Who knows where governments and central banks get their money from?

If they say they have it, they have it! That is the nature of banking.

You describe an impossible situation. You can't have infinite HPI and hide inflation. Money will be sucked out of the wider economy just to pay for shelter and service debt. There will be strikes as workers demand >5% pay increases.

Regardless, it is now down to the banks who gets the money. It was investors desire for mortgage backed securities that drove the market up to this level. That demand has now gone!

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They can keep the nominal value up (through high inflation).

In real terms, that's another story.

Please see signature.

Are you suggesting that house prices will inflate below the rate of wage inflation? Because if you are ... well I can't see it myself.

I have observed a world where, for most people (certainly in unskilled and semi-skilled jobs (building industry excepted)) wages, in real terms, have been static - or, in many cases, falling - for 20 years. I'm thinking administrative office jobs, call centres, lorry drivers, retail etc. I can't see how our economy can afford high wage rises.

No, borrowing costs will be reduced and money will be created out of thin air to keep the party going for another two years - until the next election.

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Interest Rates would have to drop to 5% just to stop house prices falling, actually it would be better to say. Mortgage rates need to drop to 5% to stop house prices falling. That would probably require either a base rate of 4.5 to 4.75% OR for the penalty rate to be reduced from Base rate + 1% to something like base rate + 0.25%

the goverment does have the power to keep HPI singing for another two years, but it would require interest rates to go down to 5% very fast, and then down to 4% slowly.

possible, but unlikely

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You describe an impossible situation. You can't have infinite HPI and hide inflation. Money will be sucked out of the wider economy just to pay for shelter and service debt. There will be strikes as workers demand >5% pay increases.

I agree you can't have infinite HPI - just until the next election. Why hasn't 'money been sucked out of the wider economy just to pay for shelter and service debt' already? Some would say it has. I know people who struggle to get by - and who top their mortgage up by 10k every now and then to pay off their credit card debts. On the face of it, if you own a house 'worth' 300k and it goes up in price by 5% a year - all you need to do is re-mortgage every couple of years - add 20k to the mortgage and find an extra £100 a month ot pay the mortgage increase. If you earn 30k a year and your wages go up 2.5% a year, your salary will have increased by £1500 over the 2 years - enough to pay the mortgage. You can carry on regardless buying your take-aways and enjoying your nights out on the credit cards etc.

Regardless, it is now down to the banks who gets the money. It was investors desire for mortgage backed securities that drove the market up to this level. That demand has now gone!

No, it is down to the government. The government will do whatever is necessary to keep the party going. Money out of thin air sir? No problem!

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Interest Rates would have to drop to 5% just to stop house prices falling

Let's see. I say that just one 0.25% cut will ignite the market after Christmas. People don't sit down with a calculator and work out to the last penny if they can afford to move house ... the whole thing works on sentiment.

'Thank heavens they've cut rates - everything will be okay now - let's get the house on the market and move up.'

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Are you suggesting that house prices will inflate below the rate of wage inflation? Because if you are ... well I can't see it myself.

I have observed a world where, for most people (certainly in unskilled and semi-skilled jobs (building industry excepted)) wages, in real terms, have been static - or, in many cases, falling - for 20 years. I'm thinking administrative office jobs, call centres, lorry drivers, retail etc. I can't see how our economy can afford high wage rises.

No, borrowing costs will be reduced and money will be created out of thin air to keep the party going for another two years - until the next election.

dont know if you noticed, but the interest rates charged by banks to mortgage holders are now detached fromt he BoE rate.

They charge a proper margin, they charge a fee up front to offset any teaser rates advertised, and now, they need a RISK PREMIUM to satisfy any investors who might like to buy the mortgage tranches.

PLUS as there is a shortage of cash, they are very picky who they lend to.

NO, they have no control over the housing market any more.

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First the prediction:

Interest rates will be cut today and the housing market will take off again straight after Christmas - exactly as it did in 2006.

Not quite. In 2005, the banks were more than happy to give 2 year fixed rate mortgages at around 4.5%.

Which was all well and good at the time, the only problem was they were lending money they didn't have.

The money was being borrowed on 3 month inter bank lending which was around the same percentage as

the fixed rates themselves. The trouble is the banks are now having to subsidise those 4.5% mortgages as

they are now borrowing the money at around 6.7% inter bank, well the ones that haven't repackaged the mortgages

and resold them to a greater fool that is.

2006 It is not.

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Why are some forum members so easily rattled and swayed by media bilge?

Stick to your guns!

That might be because the media are, even as we discourse, influencing the MPC with their manic headlines today.

It is the MPC that should stick to their guns. But they won't - because of media pressure.

And, the minute they capitulate - at 12.00 today - the media will be full of 'crash averted' stories tomorrow - Bank provides Christmas cheer and a Happy New Year for home owners and the merry go round will get another spin in January with a re-vitalised housing market.

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That might be because the media are, even as we discourse, influencing the MPC with their manic headlines today.

It is the MPC that should stick to their guns. But they won't - because of media pressure.

And, the minute they capitulate - at 12.00 today - the media will be full of 'crash averted' stories tomorrow - Bank provides Christmas cheer and a Happy New Year for home owners and the merry go round will get another spin in January with a re-vitalised housing market.

does that alter the physical facts?- credit crunch, increased lending charges, increased lending fees, criteria tightening- no

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Rate cuts now are to save the banks' arses and try and stave off systemic failure.

Yep, which is why they are guaranteed.

The "party" ended this summer.

No, the party ran out of booze in August but the BOE will walk in with a crate of Stella on their shoulder at 12.00 today.

Give it up.

This is a re-run of 2005. Slowing housing market. Doom and gloom. Rate cut before Christmas. Housing market takes off like rocket in New Year. If you're in a position to buy, might be a good idea to plunge in.

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does that alter the physical facts?- credit crunch, increased lending charges, increased lending fees, criteria tightening- no

Yes it does alter the physical facts. Lending charges will come down - liquidity will be pumped in - criteria will not be tightened. A cut today will signal to the banks that they can get away with anything. So they'll carry on. The credit markets will open again.

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Yes it does alter the physical facts. Lending charges will come down - liquidity will be pumped in - criteria will not be tightened. A cut today will signal to the banks that they can get away with anything. So they'll carry on. The credit markets will open again.

which lending charges do you think will come down?

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The rate will be cut today but there will be no 'dead cat bounce' this time. House prices have passed the peak and are on the downhill slope. I predict all index's to be showing a minus in the annual house price figures by July at the latest. At the moment we are seeing monthly figures as a minus but the annual rate is still plus. This situation has no more than 6 months left in it. Mark my words.

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Guest grumpy-old-man
First the prediction:

Interest rates will be cut today and the housing market will take off again straight after Christmas - exactly as it did in 2006.

The government and banks are not going to allow a little inconvenience like a credit crunch to stand in the way. Look at the US - a government imposed 5 year freeze on mortgage rates! Seems they can do anything they want.

Governments are the ultimate short termists. We're half way through a term - they are not going to allow a housing crash and recession spoil their chances of re-election. They will do anything to avoid this. If the BOE do not play ball - Mervyn will go. As sure as night follows day. Then the stooges will do as they are told. The media won't make an issue because the media, to a man, are lined up with the property interests.

So you're lined up against the government, the banks, the media and most of the people in this country.

They will allow inflation to rise and they will continue to lie about it. And they'll inject whatever liquidity they need to to keep the market going. Where will they get the money from? Who knows where governments and central banks get their money from?

If they say they have it, they have it! That is the nature of banking.

ah, I see we still have a live one... :D

thank god otherwise we would just be agreeing with each other & swapping 'I told you so' stories. ;)

ps - can you explain why the Japanese property market still crashed in the 90's when they dropped IR's to 0% ?

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