Wednesday, May 10, 2006

Mr Kings opinion will go a long way in bringing HPI down

Telegragh.co.uk: King sounds warning over economy

House prices are overvalued and consumer bankruptcies risk becoming a large social problem, the Bank of England Governor Mervyn King has warned.

Posted by crash 2005 @ 04:22 PM (590 views)
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9 Comments

1. Ozzmosiz said...

I like Mr King. He speaks sense, unlike most of the VI's!

Wednesday, May 10, 2006 04:53PM Report Comment
 

2. Talking_rot said...

Like it or not, Mr King has proven to be remarkable accurate over the last couple of years. while he is warning about debt levels, he does state "The position on secured debt looks relatively benign." I take this to mean that consumers who have borrowed against the value of their homes are in a "relatively" benign position. As those who are heavily indebted with unsecured loans probably don't own a home, does this mean that the debt timebomb isn't going to be one fo the factors that precipitate a house price crash afterall? Afterall, some one who doesn't own their home can not be forced to sell it!

Wednesday, May 10, 2006 05:51PM Report Comment
 

3. Ticktock said...

Rot,

But nor can they buy a house either. I think that you are probably right that most of those going under are likely to bein the FTB group, but certainly not all of them will be. Anyway, the more FTB ers are removed from the game, the more reliant the pyramid scheme becomes on the (very highly leveraged) BTL landlords.

I know that some believe these to people to have 'balls of steel' and believe that they will be prepared to sustain huge short term losses in the hope of long term gain, but I seriously doubt it. After all, fear is to a bear market what greed is to a bull market.

Wednesday, May 10, 2006 06:46PM Report Comment
 

4. European-bear said...

Secured debt becomes unsecured debt when you go into negative equity. A modest drop in house prices will therefore result in a lot of unsecured debt for FTBs, the highly MEWed, and highly leveraged landlords.

Wednesday, May 10, 2006 09:17PM Report Comment
 

5. Talking_rot said...

Ticktock

I think you are right. BTL-ers must be in it for an investment. How many will stay in that game when capital values are going down and rent doesn't cover the mortgage. I'm hoping the majority will shift their cash to invest into the stock market - if they can sell.

Wednesday, May 10, 2006 09:48PM Report Comment
 

6. Bidin'matime said...

Of course secured debt looks relatively benign - it's secured! As EB suggests, it's the over-valued property market that keeps this debt looking benign! (Even Merv agrees that the level of house prices still seems remarkably high relative to those measures that put it into context)

Wednesday, May 10, 2006 10:43PM Report Comment
 

7. Uncle Tom said...

I don't envy our Merv - who'd want to do his job, with his brain - and this government...

He's got a struggle to balance the equation if he's going to come up smiling today - and avoid being vilified by historians.

But of his ability, I have little issue - I don't see anyone else on the MPC out-smarting him!

Wednesday, May 10, 2006 10:54PM Report Comment
 

8. Harold said...

I know of one BTL'ers who is already thinking of dumping his 2 properties on the market in light of the impending IR rise(s). I wouldn't be surprised to see a bit of panic in that sector over the summer. In many cases margins in BTL land are so tight (often non-existent) that even a modest rise in IR will produce decidedly pear-shaped balance sheets. With real inflation pinching wallets, many will simply cut their losses and run: BTLers are not in it for charity.

Thursday, May 11, 2006 09:48AM Report Comment
 

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