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Bank's King Says Credit Crunch Now In New Phase

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Mr King told MPs that inflation was likely to rise to about 3%, driven by soaring oil and food costs, and rising household energy bill as well as the weaker pound.

In the real world, that represents about 10%, then :blink:

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http://news.bbc.co.uk/1/hi/business/7314127.stm

Asked about the UK housing market, Mr King predicted that house prices would be "broadly stable" over the next few years.

"broadly stable" - We don't expect to see house prices changing by 100% as they have done in recent years. In fact we expect the change in house prices to be as low as 50%. :lol:

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http://news.bbc.co.uk/1/hi/business/7314127.stm

Asked about the UK housing market, Mr King predicted that house prices would be "broadly stable" over the next few years.

The BBC have that paragraph twice in their article!

Spooky! The UKIP candidate in the forthcoming local election told me the same thing this weekend!!

What I dont understand is that in the same article Merv is quoted as saying:

a slowdown in the housing market would eventually make houses more affordable for first-time buyers, as the ratio of wages to house prices returned to more normal levels.

How can this happen if houseprices are stable? :unsure:

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Spooky! The UKIP candidate in the forthcoming local election told me the same thing this weekend!!

What I dont understand is that in the same article Merv is quoted as saying:

How can this happen if houseprices are stable? :unsure:

I would just like to congratulate everyone on their new minimum wage job at £200 per hour. :ph34r:

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Spooky! The UKIP candidate in the forthcoming local election told me the same thing this weekend!!

What I dont understand is that in the same article Merv is quoted as saying:

How can this happen if houseprices are stable? :unsure:

inflation, currency deflation and money printing ;p

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How can this happen if houseprices are stable? :unsure:

The argument goes that if we assume 3% wage inflation, the real price of houses will halve in about 24 years.

I think this explains the use of the word "Broadly" - which covers a multitude of sins - since no time-scale has been given. If prices in 2009 are the same as 2001, isn't that "broadly stable"?

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The argument goes that if we assume 3% wage inflation, the real price of houses will halve in about 24 years.

I think this explains the use of the word "Broadly" - which covers a multitude of sins - since no time-scale has been given. If prices in 2009 are the same as 2001, isn't that "broadly stable"?

3% - your wage is double in 25 years

6% - your wage has doubled in 13 years

12% - your waged has doubled in 7 years

or

3% your mortgage is 30% cheaper in 10 years

6% your mortgage is 30% cheaper in 5 and a half years

12% your mortgage is 30% cheaper in 3 and a half years

Money supply is running at 14%, which will feed into inflation..

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3% - your wage is double in 25 years

6% - your wage has doubled in 13 years

12% - your waged has doubled in 7 years

or

3% your mortgage is 30% cheaper in 10 years

6% your mortgage is 30% cheaper in 5 and a half years

12% your mortgage is 30% cheaper in 3 and a half years

Money supply is running at 14%, which will feed into inflation..

Some forget that the inflation effect does erode real value of houses but it also erodes any debt repayment on them as well.

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very true

some bloke at work in his 50's (who, to be honest, is a smart :rse and I don't like him) said that he had a relatively high mortgage back in the 80's (i think it was) and then, suddenly, after the oil crisis and inflation, to his deligt, his mortgage had suddenly become less than a years wages. Therefore he paid off his 25 year mortgage in no time and as a result of prudent moves etc now has a big house and a low morgage.

Is this what is going to happen to us then? i take the point about inflation only being "good" if the impact is equal on commodities AND wages.

Edited by too soon to buy?

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Money supply is running at 14%, which will feed into inflation..

Money supply growth has been running at 14% for several years... and it has been feeding through into house price inflation - but little else.

If my hunch is right, and money supply growth now relates to buying illiquid bonds, that used to suffice as long term savings, to shift pensions etc. into less risky assets, then this money supply growth will not generate inflation - on the contrary, it is short-to-medium-term deflationary - since savings in cash grow more slowly than savings in illiquid bonds (why else would they have been bought.) Any long term profits arising from buying illiquid bonds from credit will be locked away for the foreseeable future.

I suspect that if general inflation takes off (and I'm not convinced that it will) then this will be as a consequence of stemming new investment in property... but, frankly, I see an increase in the savings rate being more probable.

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some bloke at work in his 50's (who, to be honest, is a smart :rse and I don't like him) said that he had a relatively high mortgage back in the 80's (i think it was) and then, suddenly, after the oil crisis and inflation, to his deligt, his mortgage had suddenly become less than a years wages. Therefore he paid off his 25 year mortgage in no time and as a result of prudent moves etc now has a big house and a low morgage.

Is this what is going to happen to us then? i take the point about inflation only being "good" if the impact is equal on commodities AND wages.

Here is an example of this form oz with actual median price growth used.

If you bought an average home 40 years ago, you probably had to pay $8k for it at the time, and say you took on a 100% mortgage (without using any of your money).

Over the next 40 years, you didn’t pay anything back (neither interest nor principle), you may end up with roughly $120k debt and a property valued at roughly $360k, so you will create a net worth of about $240k.

It is not hard to see that the principle of the mortgage $8k you borrowed 40 years ago has lost its significance compared to today's money. This is the magic of inflation, which allows your debt to drop in value in real term over the years.

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Here is an example of this form oz with actual median price growth used.

If you bought an average home 40 years ago, you probably had to pay $8k for it at the time, and say you took on a 100% mortgage (without using any of your money).

Over the next 40 years, you didn’t pay anything back (neither interest nor principle), you may end up with roughly $120k debt and a property valued at roughly $360k, so you will create a net worth of about $240k.

It is not hard to see that the principle of the mortgage $8k you borrowed 40 years ago has lost its significance compared to today's money. This is the magic of inflation, which allows your debt to drop in value in real term over the years.

then BTL was invented.. its an interesting thought don't pay the mortgage and your only left with a 120k of debt after 40 years...

Edited by moosetea

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How can this happen if houseprices are stable? :unsure:

I suppose he could be saying that if house prices remain flat, and wages grow at (or above) inflation, this allows everything else to catch up.

Of course, we all know this is nonsense, and I don't think he believes that this will happen for an instant. Markets don't act in this way. However, that would be a defensible position that he could take.

Edited by Notlongnow

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some bloke at work in his 50's (who, to be honest, is a smart :rse and I don't like him) said that he had a relatively high mortgage back in the 80's (i think it was) and then, suddenly, after the oil crisis and inflation, to his deligt, his mortgage had suddenly become less than a years wages. Therefore he paid off his 25 year mortgage in no time and as a result of prudent moves etc now has a big house and a low morgage.

Is this what is going to happen to us then? i take the point about inflation only being "good" if the impact is equal on commodities AND wages.

No!! Globalisation will see to that!

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then BTL was invented.. its an interesting thought don't pay the mortgage and your only left with a 120k of debt after 40 years...

a BTL perspective ;)

Example 2:

If you think the value of properties (from $8k to $360k over the last 40 years) is a good indication for what has really happened in Australia in general. How about using the same formula moving forward for 40 years?

The diagram shows a property will go from $360k to $16Million in the next 40 years, and if you borrow the whole lot (a mortgage again), without paying any interest or principle over next 40 years, you will end up having a $11Million net worth.

Remember the interest you didn’t pay will generate more interest, so it is interest on interest compounding for 40 years! But it is still no big deal in the whole scheme of things.

Money loses value over time through inflation, it includes the money you borrow, and the interest you have to pay.

Example 3:

What if you bought an investment property instead of a home 40 years ago?

For simplicity, we assume your net rent is 3% here, and your debt is gradually paid off because rent is increasing over time.

If you didn’t reinvest into other things, you will end up having almost $500k net worth.

Obviously most investors don't wait for the cash to sit there, they usually reinvest into other things.

Example 4:

Using the same formula as example 3, moving forward for another 40 years, your net worth will be hitting $22Million, just by simply having one average investment (a $360k mortgage) today!

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http://news.bbc.co.uk/1/hi/business/7314127.stm

Asked about the UK housing market, Mr King predicted that house prices would be "broadly stable" over the next few years.

The BBC have that paragraph twice in their article!

Mervyn appears to concur with the pre-crash statement by David "Mr. Realestate" Lereah, the former cheif "economist" of the US National Association of Realtors who said, in 2005, that the US property market would plateau (remain broadly stable).

Is this the same Merv that said "house prices are a matter of opinion whewreas debt is real?"

Come on Merv, get real and don't spoil your reputation with this drivel. Otherwise you will become known as Merv the Swerv and joing the ranks of Crash Gordon and U-turn Ali.

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Nice find RB , New build dreams turn to dust ................

the two-bedroom apartment in a converted Victorian biscuit factory must have seemed fairly priced to Christopher Williams at £236,500.

Now, three years on, Williams's outlay for a slice of the city-living dream looks ridiculous. His flat has been repossessed and will go under the auctioneer's hammer tomorrow with a guide price of £100,000.

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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