Jump to content
House Price Crash Forum
Sign in to follow this  
Once in a lifetime

Home Truths About The Housing Crisis

Recommended Posts

"I have no doubt that historians will look back at the early 2000s as years of dazzling incompetence. The largely unregulated British financial system was allowed to fuel an unsustainable house price boom. The consequent levels of debt collateralised against crazily valued house prices was an act of folly, a dereliction of duty by the City of London that financed the lending, the Bank of England and Financial Services Authority that indulged it and a New Labour government too frightened to prevent it. It will take a long time to be forgiven or forgotten."

Well, well, well Hutton --- It looks like you have finally seen REALITY -- At last!!! It took you some time.

Share this post


Link to post
Share on other sites

Only thing that gets me is, if the government is expected to insure all morgages thereby protecting the entire risk to the banking industry, why do we need the banking industry at all. Why can't the government lend everything through northern rock (the government bank) and cut out all the fat cats who add 2% to the cost of morgages?

Have to say the free market runners of this world (ie the Americans) do far more to protect their consumers than the so called social democrats HA HA. That is my problem with new labour. It only gets decisive to save the rich in a crisis. And even then it is caving to their demands that it don't do nothin' for the poor at the same time.

Share this post


Link to post
Share on other sites

Corruption and shocking incompetence will indeed define the New labour period.

Someone close to me - despite my advice - bought a one bed flat for £160,000 in December 07, just as the cracks were beginning to appear.

The vendor was a financial advisor, the same mortgage 'expert' set up the deal in question and advised my friend to lie about their income to obtain the IO self certification loan, on a two year teaser rate of course. These sorts of crimes are likely to go unpunished by the FSA, depsite their insidious nature of pricing out those that weren't prepared to commit fraud in order to obtain shelter.

Reading about it in articles is one thing, but to have it happen so close is another and it really helps hammer home the reasons for this unsustainable boom and eventual housing bust. And to think, Harriet Harperson was on the T.V this morning trumpeting Brown's record on financial stability :blink:

Share this post


Link to post
Share on other sites
Only thing that gets me is, if the government is expected to insure all morgages thereby protecting the entire risk to the banking industry, why do we need the banking industry at all. Why can't the government lend everything through northern rock (the government bank) and cut out all the fat cats who add 2% to the cost of morgages?

Have to say the free market runners of this world (ie the Americans) do far more to protect their consumers than the so called social democrats HA HA. That is my problem with new labour. It only gets decisive to save the rich in a crisis. And even then it is caving to their demands that it don't do nothin' for the poor at the same time.

I thought this was an interesting piece:

What to do now? The only good news is that at least house prices have fallen quickly,

between half and two-thirds of the necessary adjustment.

A couple of insiders, justifying the government's laissez-faire inactivity,

have told me there needs to be a substantial correction before creating any American-style interventions to stabilise the market.

Prices needed to fall, but I would be more confident if I felt that more officials understood the risks and dangers.

If 2008's house price fall extends into 2009 and 2010, Britain will be engulfed. A recession will be guaranteed.

Share this post


Link to post
Share on other sites
Only thing that gets me is, if the government is expected to insure all morgages thereby protecting the entire risk to the banking industry, why do we need the banking industry at all. Why can't the government lend everything through northern rock (the government bank) and cut out all the fat cats who add 2% to the cost of morgages?

Have to say the free market runners of this world (ie the Americans) do far more to protect their consumers than the so called social democrats HA HA. That is my problem with new labour. It only gets decisive to save the rich in a crisis. And even then it is caving to their demands that it don't do nothin' for the poor at the same time.

Because then you tie in access to credit with gvt idealogy and social engineering aims of a centrally planned economy. i.e. a good short cut towards a totalitarian state.

Share this post


Link to post
Share on other sites

I recall an article by him, around the time when the bubble peaked, discussing a meal at which both older and younger members of his family were present, and of the stark difference between their outlooks and interests regarding the property market.

But he's also unwilling to see prices fall (or at least, he wants the fall limited and controlled) and so he calls for government intervention to prop them up.

When he says something like:

We also need some government-initiated form of reinsurance for new mortgage lending to persuade lenders they have protection against default.

he's implicitly calling for prices to be propped up, because the lender's protection is supposed to be the value of the collateral. In short, he is calling for mortgages to given that are known to be in excess of the property's true value. This seems highly irresponsible to me, and I wonder if Hutton would advise one of the young relatives that sparked the dinner-party article to take a mortgage under such circumstances.

Share this post


Link to post
Share on other sites
he's implicitly calling for prices to be propped up, because the lender's protection is supposed to be the value of the collateral. In short, he is calling for mortgages to given that are known to be in excess of the property's true value. This seems highly irresponsible to me, and I wonder if Hutton would advise one of the young relatives that sparked the dinner-party article to take a mortgage under such circumstances.

He's calling for Fannie UKae. We all know how well that worked out across the pond.

t's only partly a joke. Mortgage approvals are running a third of a year ago; prices are down over 15 per cent from their peak, with the rate of fall accelerating.

Anyone know what numbers he is referring to? I haven't heard 15% yet.

Edited by mirage

Share this post


Link to post
Share on other sites

Excellent comment from "Allein":

Let me put it straight : this is not a credit availability crisis.

Just like banks, households are cutting off on their spendings because their liabilities current (debts) and anticipated ones (rising bills) are too high. You can now pour as much cheap and easy-to-get credit into the system, households will not borrow more to prop up the economy leave alone house prices (see the US).

This will carry on until asset prices are back in line with real earnings and wealth creation adjusted for "real" inflation (meaning not the fudged official statistics) because it is a matter of economic survival for households.

There is something worse for an economy than a lack of (cheap) credit and that is when economic players are not willing to borrow or consume more whatever credit conditions are. The problem is not the supply of credit. It has now moved to the demand for credit (again see limited impact of rate cuts in US). As this is an asset price to income crisis not a credit crisis, unless you think household incomes are going to rise dramatically, asset prices will have to go down.

But here is what bugs me more in the whole thing.

It is not even the difficult times that lie ahead for most of us because of banks, governments and central banks' neglect and journalists propping up the whole thing.

It is the way we are treated as idiots. As in "let us just give them more credit and they will start buying properties again and push prices up again". I am not illiterate, i can read the papers, i know inflation is up and debt everywhere and i firmly believe the man on the street to be as intelligent as i am. And i am able to make an informed decision to buy or not a property, reduce or increase my spendings based on these facts.

Share this post


Link to post
Share on other sites
I recall an article by him,
The Labour party has been paralysed, writing off taxing as leftist and impractical. But the politics of the house-price inflation machine are beginning to change. It may have made many over-50s very rich, but for the rest the social division, the private heartache, the risks of massive indebtedness and yet dearer houses make no sense. Right-wing policies have created a world we don't like. The pendulum is swinging back.

This guys an utter nutjob.

Share this post


Link to post
Share on other sites
Guest happy?
Only thing that gets me is, if the government is expected to insure all morgages thereby protecting the entire risk to the banking industry, why do we need the banking industry at all. Why can't the government lend everything through northern rock (the government bank) and cut out all the fat cats who add 2% to the cost of morgages?

Have to say the free market runners of this world (ie the Americans) do far more to protect their consumers than the so called social democrats HA HA. That is my problem with new labour. It only gets decisive to save the rich in a crisis. And even then it is caving to their demands that it don't do nothin' for the poor at the same time.

Put simply New Labour is terrified of being identified as Old Labour. This means that any sensible measure designed to regulate the excesses of a free market gone mad is jettisoned without consideration.

Share this post


Link to post
Share on other sites
I recall an article by him,
A recent report from the National Housing and Planning Advice Unit, chaired by economist Professor Stephen Nickell, argued that despite the doubling in house prices over the last 10 years, today's property market is still not overvalued. Higher demand, with another 223,000 new households forming every year is meeting stagnating supply. In 2000, house prices on average were four times incomes; now they are seven times and over the next 20 years will rise to 10 times.

It is an argument that is hard to counter - in which case there is trouble ahead. The Bank of England needs to see a sharp deceleration in house-price inflation in order to meet its inflation target. But if today's prices are as solidly underpinned as Nickell argues, and set to increase by another 50 per cent in the years ahead, then interest rates may have to rise very high indeed in the immediate future - certainly to 7 or even 8 per cent - to get the result the Bank needs.

What policy-makers obviously want to see is an orderly slowdown in prices rather than actual falls, while something is done to avert Nickell's forecast. Yet the whole exercise is fraught with risk. The market is frothy; many individuals are overborrowed. Anybody buying a house today risks seeing the price falling sometime in 2009 or 2010. House prices will probably begin to increase again afterwards, but today's risks are.

I'll second that nut-job.

Yes, clearly prices will eventually rise to income multiples of one hundred and forty-three. Simply because people want houses. It's a hard argument to counter.

Edited by mirage

Share this post


Link to post
Share on other sites
I'll second that nut-job.

Yes, clearly prices will eventually rise to income multiples of one hundred and forty-three. Simply because people want houses. It's a hard argument to counter.

I agree. Why eat?

Share this post


Link to post
Share on other sites

Considering that article was written on July 8th 2007, i.e. after the credit crunch began, isn't it downright hilarious that a pair so clueless get to (a) write in a national newspaper and (b ) advise the government on housing policy?

A recent report from the National Housing and Planning Advice Unit, chaired by economist Professor Stephen Nickell, argued that despite the doubling in house prices over the last 10 years, today's property market is still not overvalued. Higher demand, with another 223,000 new households forming every year is meeting stagnating supply. In 2000, house prices on average were four times incomes; now they are seven times and over the next 20 years will rise to 10 times.

It is an argument that is hard to counter - in which case there is trouble ahead. The Bank of England needs to see a sharp deceleration in house-price inflation in order to meet its inflation target. But if today's prices are as solidly underpinned as Nickell argues, and set to increase by another 50 per cent in the years ahead, then interest rates may have to rise very high indeed in the immediate future - certainly to 7 or even 8 per cent - to get the result the Bank needs.

An argument that's hard to counter eh? So how come so many non-economists on this forum and others saw this debt/housing bubble for what it was when it started inflating rather than 6 months after it had burst like you did Will?

I know people like Nickell get picked as government advisors mainly because they (a) have the right credentials and (b ) are prepared to tell the politicians that there is no bubble and they haven't screwed up but, let's be honest, how effing credible was the suggestion that prices were going to rise another 50% this time last year? You didn't have to be John Maynard Keynes to work out that there was no way that households could service the scale of debt that sort of rise implied? Yet still these idiots got to spout this drivel unchallenged by anybody in public life.

It never ceases to amaze me that people who have been proven to be so absurdly wrong have reached such prominent, influential positions in this country. And it does not bode well for our future at all.

Share this post


Link to post
Share on other sites
Guest Steve Cook
Corruption and shocking incompetence will indeed define the New labour period.

Someone close to me - despite my advice - bought a one bed flat for £160,000 in December 07, just as the cracks were beginning to appear.

The vendor was a financial advisor, the same mortgage 'expert' set up the deal in question and advised my friend to lie about their income to obtain the IO self certification loan, on a two year teaser rate of course. These sorts of crimes are likely to go unpunished by the FSA, depsite their insidious nature of pricing out those that weren't prepared to commit fraud in order to obtain shelter.

Reading about it in articles is one thing, but to have it happen so close is another and it really helps hammer home the reasons for this unsustainable boom and eventual housing bust. And to think, Harriet Harperson was on the T.V this morning trumpeting Brown's record on financial stability :blink:

new labour didn't cause this for goodness sake...

They are just mouthpieces for the current policy of the poeple who really run our world. A few oligarchs and the multinationals. Do you think George Bush is New Labour?

There is a bigger picture out there my friend. I don't pretend to understand the half of it. But one thing's for sure, it''s bigger than a half-arsed political party in government at the moment

Edited by Steve Cook

Share this post


Link to post
Share on other sites

http://www.guardian.co.uk/commentisfree/20...ed=networkfront

In today's housing market, you don't argue with a potential buyer. Selling our house required us to exchange and complete in seven days and of course we agreed. The house price surveys don't convey the scale of the crisis in the market or the price falls. So, a frenzied seven days later, we moved out and probably became the British housing market's transaction in July.

Did he STR ?

Share this post


Link to post
Share on other sites

I'm sorry, I'm just looking for a random thread to post my favourite quote from today's papers; but it seems entirely appropriate here...

But guess what? If you borrow too much, you are totally f*****," said one adviser working in the sector.

Sunday Telegraph

Share this post


Link to post
Share on other sites
I'm sorry, I'm just looking for a random thread to post my favourite quote from today's papers; but it seems entirely appropriate here...

"But guess what? If you borrow too much, you are totally f*****," said one adviser working in the sector.

:lol::lol:

Share this post


Link to post
Share on other sites
He's calling for Fannie UKae. We all know how well that worked out across the pond.

Anyone know what numbers he is referring to? I haven't heard 15% yet.

Maybe he's had a sneak preview of Nationwide's latest housing figures, due out on Thursday (I think) :blink:

Share this post


Link to post
Share on other sites
QUOTE (eric pebble @ Jul 27 2008, 10:46 AM) *

Well, well, well Hutton --- It looks like you have finally seen REALITY -- At last!!! It took you some time.

Probably due to having flogged his own gaff

Yup --- Total hypocrite....

Share this post


Link to post
Share on other sites
[seven years later after buying at the bottom...] Well, it's been a hard search, we've had to reject loads of places but at last we move out of our comfy old rented place. Yes, I know I'm shooting myself in the foot but I just 'want to buy'. Call it 'nesting' perhaps, but... [endless dinner party bore, bleeding-heart-but-silently-brutally-selfish wittering unto death...]

Very good ---Very true....

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 399 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.