Browns Just Said It On Pmq

[GrillsBears]

Despite the constant talk of getting the banks lending again, the problem is that it was lending silly amounts to people who really couldn't afford it that caused this mess. How can the banks go back to lending the amounts they were? They simply cannot. Especially with house prices falling as banks can no longer guarantee the house as reliable collateral for the loan.

It just doesn't make sense. It's like those people who borrowed from one bank to pay off a loan at another bank with the interest steadily increasing and the amount owed steadily increasing until they are in completely over their head. I imagine things will just get worse - unless anyone can somehow point out how things would improve?

That assumes house prices keep falling. With free money they won't will they?

It makes the abyss we'll fall into when it finally goes tits up darker and deeper but the cretins in charge are setting the conditions to protect themselves and ****** everyone else.

[squire]

There's also the other issue that with personal indebtedness so high who the hell wants to take on more debt given the catastrophe that's just played out so publicly?

Consumers are drowning in debt already.

I have to agree with this - I don't know many people rushing out to get themselves another loan. Most people I've been talking to are concerned with what they've seen played out as you've said and will want to stay away from more debt.

I also imagine there would be less pressure on banks from shareholders to rake in the profits they were before so banks don't need to continually push themselves. No one has confidence in the banks. The only expectations now is to most certainly never repeat the silly lending practicises that got us where we are now, especially when it's tax payers money involved (approx. £16,000 per person as far as I've heard).

[thecrashingisles]

That assumes house prices keep falling. With free money they won't will they?

It makes the abyss we'll fall into when it finally goes tits up darker and deeper but the cretins in charge are setting the conditions to protect themselves and ****** everyone else.

I really don't understand why you can't see that "when it finally goes tits up" is right now. It's happening.

[Leonard Hatred]

The only expectations now is to most certainly never repeat the silly lending practicises that got us where we are now, especially when it's tax payers money involved (approx. £16,000 per person as far as I've heard).

True. It would only take one person to shout "sub prime" and they would be finished.

[Wires 74]

Can`t see prices dropping 40% though - surely at that level the yields will be so attractive that the big players will swoop in and clean out the entire market ?

[squire]

That assumes house prices keep falling. With free money they won't will they?

It makes the abyss we'll fall into when it finally goes tits up darker and deeper but the cretins in charge are setting the conditions to protect themselves and ****** everyone else.

Well, I'm guessing the banks can only give out so much of that 'free money' so house values will have to shrink to fit what the market can afford. No longer will Joe Bloggs earning £15,000 a year buy a £150,000 house without any savings. Even less chance when he has debts of a few grand.

[zoid]

That is the key.

"Maximum 3.5 x ONLY" should become the National - and International - Anthem.

I agree although this is the real catch 22 situation, if banks were to start lending at sensible levels then house prices must fall, simply because people can only pay as much for a property as the amount of deposit they have and the amount the banks are willing to lend. This is what we have been starting to see, the VI spin say people can’t get mortgages but we know this to be nonsense, they just can’t get mortgages to buy currently over inflated prices, come up with enough deposit to reduce the LTV ratio or just ask to borrow less and the banks will lend.

What should happen is for prices to be allowed to fall back quickly to fundamentally sound levels, this will require a severe but short recession to clear out the system but predictable the Government don’t what this to happen.

The Government must now have increasingly more influence over the banks and will try to persuade them into lending again, they want to try and price fix, they are again expanding the money supply by borrowing and reducing the interest rates, will this just be enough to stop the financial collapse or will it be enough to re-inflate the bubble, it is yet to be seen if this can or will work?

Personally I just can’t see it working without having serious inflationary consequences leading to worst situation then we are currently in already!

[GrillsBears]

Well, I'm guessing the banks can only give out so much of that 'free money' so house values will have to shrink to fit what the market can afford. No longer will Joe Bloggs earning £15,000 a year buy a £150,000 house without any savings. Even less chance when he has debts of a few grand.

Nope the governments can give out infirnite free money as long as the govt guarantees remain in place. Since no timescale for repayment has been agreed the Government could essentially say that our children's children's children will have to pay it all back.

Joe Blogs will be able to do as described via a Government owned bank by January.

As for "it's happening now comments" HPC isn't. Record low transaction levels do no indicate a crashing market. They represent one in stalemeate with only forced sales setting prices. There are not enough of those to set the wider market. The vast majority of houses will not be available for 50% off their peak prices.

Give it 6 months and Government mortages we'll see insanity prevail.

[thecrashingisles]

As for "it's happening now comments" HPC isn't. Record low transaction levels do no indicate a crashing market.

********. Was there a house price crash in the early 90s, yes or no?

If you answered yes then how can you deny that there is a crash now when the price indices indicate that prices are falling faster now than they did then.

Record low transaction levels just tell us that it will get much worse from here.

[chevin]

What should happen is for prices to be allowed to fall back quickly to fundamentally sound levels, this will require a severe but short recession to clear out the system

but what you are suggesting never happens. Quick falls cause real damage because it falls past what you refer to as sustainable levels. Short severe recessions never happen for similar reasons. The government are simply trying to apply what brakes they have to a train crash. When a train crashes what train do you then use?

[copydude]

There's also the other issue that with personal indebtedness so high who the hell wants to take on more debt given the catastrophe that's just played out so publicly?

Consumers are drowning in debt already.

Agree with a few posts here.

Joe Public's ability to take on more debt has been seriously eroded in the last couple of years - stealth taxes, utility bills, inflation . . . Not even idiots can countenance any more. Any borrowing will be largely to service existing debt. Painfully.

The crazy lenders like B&B and Northern Rock are no longer in the market. So a return to HPI is highly unlikely. All the indicators in retail sales and leisure and travel show that consumer spending is off the agenda.

Of course Brown is concerned about the financial sector - it's supposed to be a net contributor of corporate tax revenue. The bailouts come on top of lost revenues. I don't have a clue quite how he is going to balance the books.

Confidence in the banking sector will only come with some fundamental reforms.

I still don't understand how the patently worthless B&B was allowed a fraudulent rights issue and to continue consumer TV advertising. The banks have been exposed as cowboys and image correction will take a very long time.

[GrillsBears]

********. Was there a house price crash in the early 90s, yes or no?

If you answered yes then how can you deny that there is a crash now when the price indices indicate that prices are falling faster now than they did then.

Record low transaction levels just tell us that it will get much worse from here.

It's not a question of denial. the 90's HPC took 8 years to play out. House prives also fell in 2003 and 2005. Are you going to tell me that the peak in 2007 therefore did not exist. Alternatively you could say "it's different this time"

[thecrashingisles]

It's not a question of denial. the 90's HPC took 8 years to play out. House prives also fell in 2003 and 2005. Are you going to tell me that the peak in 2007 therefore did not exist. Alternatively you could say "it's different this time"

Are you seriously comparing the situation now with 2003 and 2005?

Year-on-year house price inflation certainly didn't go negative in those years and historically, as you point out, when year-on-year figures go negative they tend to take a very, very long time to turn around.

[GrillsBears]

Are you seriously comparing the situation now with 2003 and 2005?

Year-on-year house price inflation certainly didn't go negative in those years and historically, as you point out, when year-on-year figures go negative they tend to take a very, very long time to turn around.

Actually it's a tad facetious but yes I am. What did the Government do in both 2003 and 2005 in order to keep things going? What are they doing now?

[thecrashingisles]

Actually it's a tad facetious but yes I am. What did the Government do in both 2003 and 2005 in order to keep things going? What are they doing now?

Cut a quarter of a percent off interest rates. It's hardly comparable to part-nationalising the banking system. We are heading into recession. Ultimately that will trump any amount of mortgage lending the government tries to create.

[FernandoMorientes]

'copydude' has summed up the siuation in the UK nicely I have ot agree with those comments.

Aside from the UK, HPI was a global boom, look at the US. You are not going to get Freddie & Fannie part 2 for a few years, maybe decade?

I simply cannot see another Northern Rock style bank suddenly taking up the reigns of liar loans and cheap mortgages, there is too much toxic debt out there and the consumer is going to be weighed down in a mire of tax burdens, it just ain't gonna happen over night.

It's not a question of denial. the 90's HPC took 8 years to play out. House prives also fell in 2003 and 2005. Are you going to tell me that the peak in 2007 therefore did not exist. Alternatively you could say "it's different this time"

[bobthe~]

Actually it's a tad facetious but yes I am. What did the Government do in both 2003 and 2005 in order to keep things going? What are they doing now?

What?

Things are already going - down.

It is one thing to give something a boost with a bit of a push, but it is another thing trying to push a tanker that is coming in your direction, when all you have is a large piece of rope.

[Bloo Loo]

What?

Things are already going - down.

It is one thing to give something a boost with a bit of a push, but it is another thing trying to push a tanker that is coming in your direction, when all you have is a large piece of rope.

Im sure there is some guru around who would do that rope trick with his foreskin.

[Guest An Bearin Bui]

Not going to happen, though. Securitisation is still dead.

This is the key to it all and will determine how the housing market goes. Securitisation was what allowed banks to start throwing money at anything with a pulse in the first place. It made banks believe that risk had been eliminated as high-risk loans were packaged up with low-risk loans and sold on, off their balance sheets.

As far as I understand things, this process is what initially drove the 2001-2007 wave of irresponsible lending and it has now been fundamentally disrupted. If anyone on here is on the inside of the banking industry, maybe they can confirm this for us all, but as far as I'm aware, there is nothing like the volume of securitistaion happening now that was happening 2 years ago. The market for mortgage-backed securities is dead. Yes, the US is buying up these securities to create a market as part of the $700 billion bailout but that is only to buy up toxic securities dating from pre-2007, it's not intended to cover the issuing of new securities.

Even if it does cover the issuing of new mortgage-backed securities, where is the market for these securities now? Just like with tech stocks in 2001, investors are going to be running a mile from anything even vaguely related to MBS for some time to come.