Saturday, April 21, 2007

Are lenders already factoring in rate rises up to 6%?

Credit crunch or squeezing the pips of a lemon?

There's another aspect to this which the mainstream press and most commentators have failed to cover; analysts and the chief economists of major lenders will be constantly poring over data, such as the BoE inflation figures, to establish just how much more the consumer and moreover the housing market can accept before the 'breaking point' of borrowing is reached. At what point do the lenders begin to accept that 'en-masse' the market can no longer accept the tranches of debt that have accompanied the boom in house prices over the past five years without defaults and repossessions increasing exponentially?

Posted by converted lurker @ 01:17 AM (523 views)
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2 thoughts on “Are lenders already factoring in rate rises up to 6%?

  • I think a 6% peak in rates is very optimistic given the (real) circumstances. But i guess if they can contain expectations at 6%, at least until we actually get to 6%, then they may be able to prevent the investment reaction to the real likely ‘peak’ level happening now. This seems to be how the game is played.

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  • Are these the same lenders that in the last couple of months quickly slashed fixed rates and rushed out new deals to lend money?

    Are these the same lenders that were “shocked” by inflation rises?

    Wait until they find out about REAL credit risk. That will really shock them. Think you have traded or insured your mortgage lending risk away? Think again when your market counterparty is already bankrupt before you.

    Again, lets lay out the situation:

    1. The UK has printed money and this has made it look like times are good. This includes the population AND the government. Printing is in the form of credit.

    2. The currency has not yet corrected to reflect this fact because there is still some currency speculation to go on rising yields. Eventually it will do so, pumping huge amounts of inflation into the economy in the areas that have been acting as deflators.

    3. The real effective inflation rate is much higher than stated and has heavy risk to the upside. Ever heard of the phrase “behind the curve”. The bank is beind the curve. Talk is of 0.25% rises when 1.5% rises are needed and 0.5% rate rises when 4% rises are needed etc. I vote we have a whip round and send some of these economists and banking staff on a course which covers mathematical functions other than linear functions.

    4. People think they are fantastic and successful because they have been making money buying a house, doing nothing and either withdrawing money from it like a cash machine or “flipping it on” hence they have spent a decade not improving either their real wealth, real skills, real knowledge or investing in the necessary areas which would have been useful to the country when the time comes.

    5. We have got the situation where people in the financial press who are supposed experts make statements like “the £1 trillion of debt is fine because it is secured against houses(assets)”. This is a statement so moronic and devoid of logic that just sitting here typing it makes steam come out of my ears. I can only assume the person writing it just took out a £1 million mortgage and doesnt want to fall into arrears.

    6. The regulator has STILL not sent significant letters of warning to financial instituations warning them on reckless lending nor has the banking stability committee. Some might say this is an abdication of responsibility or a derilication of duty.

    7. Saying things wont crash because they havent crashed yet and people calling a crash have been saying so for so long and it hast happened yet is a bad argument. It is so bad it should really receive physical punishment. Remember, the people predicting the crash have to predict how long the charging masses will remain stupid before waking up and the lenders will remain recklessly complicit. Most bears came in with the bar set far too high and have since limped away vowing not to predict the precise timing whilst also learning a thing or two about people in the process.

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