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Accept It - The Force Is Too Great


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Yes but at what rates? GE Money site shows typical APR at 8.7-9% !!!

you could get a two year fixed from aandl at 5.87% before the IR drop,

after 2 years there is no penalty. IMHO these rates will probably drop by .2 in the next couple of weeks

http://www.alliance-leicester.co.uk/mortga...?page=all-rates

aandl have a habit of pulling products off there website as soon as there not available, this is available to about 4.5->5x income if you wanted borrow 200,000k as a couple of FTBer on 20k and 30k to buy a house/flat it would cost you 978 quid a month (I/O). a couple on 20k and 30k would take after tax home about 4.5k per month? ie 200k would cost 20% of your take home... leaving you with 3.5k a month for bills food, cars and going out. If the same couple rented out a spare room to pay the bills they could get an additional tax free income of 300 quid a month.

the cost of debt needs to rise to 10->12% to be as restrictive as the early 90s peak.

BOOTNOTE : 200k buys alot in many parts of the country (if you can buy a property on the market 250k at 200k) a FTBer couple on 30k and 20k could afford this property with limited deposit in birmingham:

http://www.rightmove.co.uk/viewdetails-178...=1&tr_t=buy

Edited by moosetea
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The fact is that credit has become hard and expensive enough to make it difficult even for a bank to acquire credit/liquidity.

The pessmimist latches onto peripheral irrelevancies and exstrapolates that the sky is falling in.

Please, take breath and try to observe things in thier entirity and not confined to a narrow bandwidth that happens to suit your pesimistic bent. Narrow bandwiths are the space American Christian fundamentalists inhabit. Open eyes please

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The pessmimist latches onto peripheral irrelevancies and exstrapolates that the sky is falling in.

Please, take breath and try to observe things in thier entirity and not confined to a narrow bandwidth that happens to suit your pesimistic bent. Narrow bandwiths are the space American Christian fundamentalists inhabit. Open eyes please

Dogbox - have you been indoctrinated by some "success through positive thinking" cult? (simply send a cheque or postal order for $50 for a copy of our latest motivational DVD)

and why is your new avatar of a white man punching a black man? Why is the black man holding a knife? We should be told.

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It always confuses me as to why people think governments can keep markets going higher.

They must know something about public finances I do not.

The idea seems to be based on governments having access to limitless funds. I'm not sure why these people pay taxes either. Or indeed why they don't appear in the media demanding the government pay for us all to retire?

I also find it curious that it is often the same people claiming the government has this power, that claim the government is inept.

I think it is a general clouding of the mind regarding the subject matter, all thoughts welcome.

My understanding is that the government is simply the largest organisation in the country and has the largest obligation to provide services.

The government draws revenue from the economy and redistributes that revenue in a manner that is supposed to have a net positive effect on society.

A market is an cummulative expression of the sum of the opinions of its participants, backed by the sum of their material interests comitted to that market.

A government can (and many have) try to gravitate the opinions of market participants one way or another (via media or propaganda), in an attempt to drive prices up or down.

This is always in vain, all this method does is create price dislocations which are then seized upon by high cap market participants (see black Wednesday) who drive the price back to where it was.

If the government wants to support the property market, the city will simply short that effort until the government runs out of capital.

You can buy an election result by throwing money at public opinions, but you cannot fight market pricing mechanisms without losing money hand over fist.

NB

Todays rate cut is liquidity for the lenders.

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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.

All the same except we didn't have so many BTLs flooding the exit door, the Credit Crunch, First run on a British Bank for 150 years, USA going into recession, UK unsound economy, Unemployment creeping up, Supply increasing, DEmand waning. I am wondering where are these magical buyers going to come from ???? The majority of FTBs are laden with debt aned BTLs are becoming extinct like dinosaurs.

Sorry its DOOM and GLOOM in 2008. Look back to the last crash regards the interest rate argument e.g 15% to 6% and property still tanked :lol::lol::lol::lol: though until it was more expensive to rent than have a mortgage.

Edited by joey
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It always confuses me as to why people think governments can keep markets going higher.

They must know something about public finances I do not.

The idea seems to be based on governments having access to limitless funds. I'm not sure why these people pay taxes either. Or indeed why they don't appear in the media demanding the government pay for us all to retire?

I also find it curious that it is often the same people claiming the government has this power, that claim the government is inept.

I think it is a general clouding of the mind regarding the subject matter, all thoughts welcome.

My understanding is that the government is simply the largest organisation in the country and has the largest obligation to provide services.

The government draws revenue from the economy and redistributes that revenue in a manner that is supposed to have a net positive effect on society.

A market is an cummulative expression of the sum of the opinions of its participants, backed by the sum of their material interests comitted to that market.

A government can (and many have) try to gravitate the opinions of market participants one way or another (via media or propaganda), in an attempt to drive prices up or down.

This is always in vain, all this method does is create price dislocations which are then seized upon by high cap market participants (see black Wednesday) who drive the price back to where it was.

If the government wants to support the property market, the city will simply short that effort until the government runs out of capital.

You can buy an election result by throwing money at public opinions, but you cannot fight market pricing mechanisms without losing money hand over fist.

NB

Todays rate cut is liquidity for the lenders.

Great post.

Very good educational value.

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The pessmimist latches onto peripheral irrelevancies and exstrapolates

O.I.C

I for one consider the fact that a bank could not raise credit as pertinent to a discussion about the availability of credit in the current climate.

Your whole post is an absolute hand waving content free straw man, that in no way provides any arguement or evidence to counter my claims.

Also pertinent to this discusion is the fact that the FED has cut rates twice since the credit crunch began, yet the housing market continues to crash at pace across the pond. However what makes this more telling is that there is a much smaller gap in the American markets between the Fed rate and the market rate than there is here between the Boe rate and the Libor rate. Even so the Fed has still been powerless to stop the slide in the American housing market.

Also from the council of Mortgage Lenders:

Council of Mortgage Lenders warning of a lack of money available to fund mortgage markets 'if capital markets do not open next year'.

But of course this is irrlevant because credit is so soft and cheap at the moment.

Sorry to burden this arguement with facts and evidence instead of unsupported statements and strawmen.

Edited by Cptkernow
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you cannot fight market pricing mechanisms without losing money hand over fist.

Bob on kiddo. To paraphrase Euan MacGregor (playing Leeson) in "Rogue Trader"... "you can't fight the markets".

That same "market" is far, far greater in scope and power than any one of its participants, even if that participant can - to a limited extent - employ coercion to draw upon the resources of an entire national economy.

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you could get a two year fixed from aandl at 5.87% before the IR drop,

after 2 years there is no penalty. IMHO these rates will probably drop by .2 in the next couple of weeks

http://www.alliance-leicester.co.uk/mortga...?page=all-rates

aandl have a habit of pulling products off there website as soon as there not available, this is available to about 4.5->5x income if you wanted borrow 200,000k as a couple of FTBer on 20k and 30k to buy a house/flat it would cost you 978 quid a month (I/O). a couple on 20k and 30k would take after tax home about 4.5k per month? ie 200k would cost 20% of your take home... leaving you with 3.5k a month for bills food, cars and going out. If the same couple rented out a spare room to pay the bills they could get an additional tax free income of 300 quid a month.

the cost of debt needs to rise to 10->12% to be as restrictive as the early 90s peak.

BOOTNOTE : 200k buys alot in many parts of the country (if you can buy a property on the market 250k at 200k) a FTBer couple on 30k and 20k could afford this property with limited deposit in birmingham:

http://www.rightmove.co.uk/viewdetails-178...=1&tr_t=buy

I dont wish to disput your figures but....

A couple on £20k and £30 would not take home £4.5k after tax as this is £54k per annum or £4k more than they gross! Its actually nearer £3.25k

The GE money was for a comment regarding adverse credit on your scenario 9% gives interest only payments of £1,500 pa :ph34r:

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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.

All well and good, as long as someone is prepared to advance you the money to fund your consumption, or the government is prepared to print it.

The former seems to be no longer the case; the latter eventually triggers hyperinflation, meaning the desired goodies go up faster than you can MEW to pay for them.

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NB

Todays rate cut is liquidity for the lenders

Could anyone unpack this sentance a bit? Is it simply base rate down, so LIBOR down? From previous discussions, I had understood that banks didn't want to lend at all, due to clogged balance sheets and that LIBOR had become a bit of a fiction. Where will the money come from?

Peter.

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Yes but why? Your arguement is Credit = cheap and easy yet NR still couldnt get any lol. This is an obvious and blatent contradiction and reveals the fact that your whole arguement has basicaly broken down to falsly claiming that credit is cheap and easy. Unfortunately for you, stating something false repeatedly dosnt make it true.

Bloke down the road has no job, no house and a history of CCJs. He can't get credit. I can - easily. Credit is cheap and easy for me but not for him.

Is this too hard to understand. Banks won't lend Northern Rock money. But they will lend me money. Why? Because I am a better risk. It's not tricky. I haven't heard anyone complaining 'I couldn't get a mortgage' yet.

Other banks might not have totally collapsed, but they still suffered along with NR they were just a bit more financialy robust. The whole point is that they all know they can do a NR if they are as imprudent with there lending as NR.

Yes but banks like A&L and B&B are MUCH less exposed than Northern Rock. Northern Rock were in a league of their own. Seen anyone joining them?

Anyway you are claiming that the financial geography will be returning to where it was in 2005/6, please quote one example of credit being cheap and easy now as it was in 2005/6.

I can't be bothered. You quote me one example of a bank or building society that has significantly tightened credit to people that are good risks.

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All well and good, as long as someone is prepared to advance you the money to fund your consumption, or the government is prepared to print it.

The former seems to be no longer the case; the latter eventually triggers hyperinflation, meaning the desired goodies go up faster than you can MEW to pay for them.

Seems to have worked pretty well for the last 10 years or so.

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FANCYPANTS - I see you are a fully signed up member to the PC brigade with an overzealous sense of ethics.

My avatar shows 2 KravMaga students demonstrating self defence techniques. As I've been doing KravMaga for about 10 years, I fancied using a related avatar.

THAT OK WITH THE THOUGHT POLICE??

edit: I've been quite unsettled by your intimations actually and as a result I'm going to change the avatar.

Do you know I did not even think about the guys colour - really it did'nt enter my head.

Its this over anxious policing of other people that can lead to a sense of bitterness which might add to racial intollerance actualy, so thanks for making me feel a bit shitty

Edited by dogbox
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FANCYPANTS - I see you are a fully signed up member to the PC brigade with an overzealous sense of ethics.

My avatar shows 2 KravMaga students demonstrating self defence techniques. As I've been doing KravMaga for about 10 years, I fancied using a related avatar.

THAT OK WITH THE THOUGHT POLICE??

The thought police will consider your statement and decide whether to pursue a prosecution in due course. In the meantime, don't leave the country.

Edited by Fancypants
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The government draws revenue from the economy and redistributes that revenue in a manner that is supposed to have a net positive effect on society.

Key word in (my) bold there.

Redistribution can indeed affect markets. Imagine a government allowing full tax relief on mortgage payments, for example, or the ability to offset rental losses against tax. That's redistribution, not new money. Do you really think that wouldn't have an effect on the housing market? Or that a government that depends on house prices for its popularity and revenue might not be tempted to try it?

Yes, the market will win eventually (if by 'win' you mean declaring the economy as a whole to be a basket case and moving on to other markets), but the time scale is important here: a few years, a decade? Sure, such a move would drain money from other areas of the economy, but it could keep the housing market propped up for many years. Who'd keep a short open that long when there are other potential targets for investment/speculation?

Your statements are true for a truly free market (housing isn't one - it can be, and arguably is, rigged in a number of ways) and potentially over timescales that are of more interest to academics than market participants. If you thought house prices were too high in 2002, for example, you're unlikely to be consoled by the reassurance that the market will win one day. The economy may be b*ggered beyond recognition by then.

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I dont wish to disput your figures but....

A couple on £20k and £30 would not take home £4.5k after tax as this is £54k per annum or £4k more than they gross! Its actually nearer £3.25k

The GE money was for a comment regarding adverse credit on your scenario 9% gives interest only payments of £1,500 pa :ph34r:

yeah sorry I'm wrong your right, a couple on 20 and 30k will take home 3k per month but it onyl makes it a little less affordable. I/O on 200k will 1/3rd of the take home salary, but they could rent a room to make things easier even...

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Key word in (my) bold there.

Redistribution can indeed affect markets. Imagine a government allowing full tax relief on mortgage payments, for example, or the ability to offset rental losses against tax. That's redistribution, not new money. Do you really think that wouldn't have an effect on the housing market? Or that a government that depends on house prices for its popularity and revenue might not be tempted to try it?

Yes, the market will win eventually (if by 'win' you mean declaring the economy as a whole to be a basket case and moving on to other markets), but the time scale is important here: a few years, a decade? Sure, such a move would drain money from other areas of the economy, but it could keep the housing market propped up for many years. Who'd keep a short open that long when there are other potential targets for investment/speculation?

Your statements are true for a truly free market (housing isn't one - it can be, and arguably is, rigged in a number of ways) and potentially over timescales that are of more interest to academics than market participants. If you thought house prices were too high in 2002, for example, you're unlikely to be consoled by the reassurance that the market will win one day. The economy may be b*ggered beyond recognition by then.

Whether they tried a full tax relief on mortgages (smaller government) or paid peoples mortgages for them (larger government), they would quickly run out of money to do so.

Take what the whitehouse has suggested; a freeze on sub-prime mortgage rates for five years.

This may well help those Americans struggling to pay their mortgages to hang on to their homes,

but it will crush the value of the securities backed by those mortgages,

crush any future demand for those securities,

discourage foreign investment in the US,

strangle access to global credit flows of US mortgage brokers for any future lending,

and thus take more money away from the struggling US housing sector.

In the medium and long term this does nothing to support prices. Infact it hurts long term prices by discouraging inward investment.

Government intervention, even through good intentions, is sadly often shortsighted and damaging.

Paulson himself will be all too aware of this.

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The Mortgage Interest Freeze proposals made by Bush/Paulson to look like he cares are amusingly exposed as the very minor contribution they are by Minyanville's satire today (love the development names! "Magnolia Stone Haven Wintergardengreen Court Acres Estates") ;

Point/Counterpoint: The Subprime Rescue Plan

Point

The Subprime Rescue Plan Will Help Save Our Home

By Richard Jones

Thank you Treasury Secretary Hank Paulson, thank you! With news of this subprime rescue plan you and the mortgage industry are proposing, we finally are able to see some welcome relief on the horizon. Why, mortgage lenders everywhere are signing up left and right to endorse the plan. Yes, relief is finally here!

I don't mind telling you, the little missus and I were worried. In 2002 we took out a $500,000 Option ARM mortgage, an adjustable rate mortgage with the option of making interest only payments for the first five years with a five-year incremental step-up in payments.

Everything was looking fine for the first five years. Our initial monthly payment on the Option ARM mortgage was around $1,600. Over the past five years it has slowly crept up to $2100. That extra $500 is beginning to hurt. In August, however, our mortgage lender sent us a note telling us what the 2008 payment is going to be. Prepare to grab the seat of your pants: $4,100!!!! That's right, $4,100!!! Who can afford a payment like that?!?!

Even worse, thanks to what they call "negative amortization," whatever that means, they say our original loan balance of $500,000 is now $535,000!!! How did that happen?!?! Obviously we were worried. That kind of mortgage payment would ruin us. We'd have to sell... assuming we could find a buyer. And I don't even know that we could sell for a price that covers the $535,000 mortgage!

Well, thanks to this subprime rescue plan we're back in business! Our refinancing papers are already in. We're going to take down a fixed-rate mortgage this time at a payment we can handle. Looks like things really do work out in the end, just like those mortgage ads say. My wife and I can sleep at night again. Thank you Treasury Secretary Paulson!

Counterpoint

Mr. Jones, I'm Afraid There's a Little Problem With Your Refinancing Application

By Darren Salisbury, Mortgage Loan Officer

Is this Robert Jones? I meant Richard, sorry. Richard Jones at 233511 Magnolia Stone Haven Wintergardengreen Court Acres Estates? Ok, good. Wow, uh... Mr. Jones, I, uh, I hate to be the bearer of bad news here, but there seems to be a slight problem, with, ah, with your refinancing application. No, no we got your check for the $500 processing fee, no problem there. That's not refundable, by the way, just want to be clear on that. Right. Yeah, it, uh, just kind of looks like we're not going to be able to approve this refinancing package. It just doesn't fall into any of the groups the subprime rescue plan has outlined.

Yes, I'm sure. Whoa, absolutely, I agree $4,100 a month is way, way too high for a house in, ah, where are you? Right, Magnolia Stone Haven Wintergardengreen Court Acres Estates.

Hey, did the developer ever finish the community pool and recreation facilities there? Wow, I'm surprised at that. They were the same developers as Crystal Glen Squire Thirstwood Cove Hammock Lake and they finished the community pool and rec center on that development six or eight months before they abandoned it. Well, on the bright side, with the upcoming Fed rate cut and all next week, maybe they'll come back and finish it. Would certainly help the resale value.

Yes, I checked on that and unfortunately you're outside the GSE guidelines and, look, Fannie Mae and Freddie Mac ain't exactly in the best position to be making rescue loans these days. Have you tried taking in some boarders, maybe raising some cash by renting out the east wing? Ok, just a thought. Well, good luck with everything. If it gets down to the wire, give me a ring back. My brother-in-law handles distressed property sales.

:lol:

(posted elsewhere)

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Whether they tried a full tax relief on mortgages (smaller government) or paid peoples mortgages for them (larger government), they would quickly run out of money to do so.

Take what the whitehouse has suggested; a freeze on sub-prime mortgage rates for five years.

This may well help those Americans struggling to pay their mortgages to hang on to their homes,

but it will crush the value of the securities backed by those mortgages,

crush any future demand for those securities,

discourage foreign investment in the US,

strangle access to global credit flows of US mortgage brokers for any future lending,

and thus take more money away from the struggling US housing sector.

In the medium and long term this does nothing to support prices. Infact it hurts long term prices by discouraging inward investment.

Government intervention, even through good intentions, is sadly often shortsighted and damaging.

Paulson himself will be all too aware of this.

So why do it? What tangible political advantage does GOP get, what economic advantage does Goldman Sach get?

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yeah sorry I'm wrong your right, a couple on 20 and 30k will take home 3k per month but it onyl makes it a little less affordable. I/O on 200k will 1/3rd of the take home salary, but they could rent a room to make things easier even...

so they hock themselves up to their eyeballs to move out of their parents house for some privacy, then take on a lodger.

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"To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end." - Friedrich Hayek 1933

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