Saturday, July 21, 2007

6.75% rates called by BNP Paribas.

Surprise on economic growth adds to fears of interest rate rise

"Alan Clark, of BNP Paribas, added: "There is a case to increase even further, to as high as 6.75 per cent, but we doubt the MPC has the appetite to stall growth to achieve a lasting slowdown in inflation". In time, they won't have a choice. The time is running out for the MPC and the housing market. The question on everybody's lips here is, why on earth does the MPC not have the appetite to do its job? Are they holding back the floodgates for an early election? Or are they infact an anarchistic organisation disguised with suits intent on destroying the economy? Are they a wing of Al Qaeda? Is David Branch Flower Power infact Osama's second in charge?! Because I tell you, letting inflation get out of control to this extent will do far more damage to the economy than bombs.

Posted by planning4acrash @ 12:29 AM (588 views)
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5 thoughts on “6.75% rates called by BNP Paribas.

  • planning4acrash says:

    I’ve just discovered something quite amazing, look at the graph on the link above, as I’m sure most people have, but divide the house price at the peak of the last boom by the trend price at that point, and prices are 35% above trend around 1992. The statement on the page suggests that where we are now is a mountain compared to last time, but, do the same calculation for current prices and you find current prices 35% above trend. That is not to say that we are in less of a bad situation, but to say simply that prices are now as overpriced as they were at the point of the last crash. Ripe for a correction! Considering that prices corrected to be 30% below trend about five yrs later, this would suggest that prices could go down the same, given that a pattern seems to be emerging here. That would imply prices going down to 100k, 30% below 140k, which should be about trend in 5yrs time. For those who think, no way, consider that prices WERE 100k just six years ago in 2001. So, my prediction is, that IR’s will rise above house price inflation by Christmas, and above house price inflation and capital repayments by mid winter, turning yields negative for highly leveraged owners. A full crash as a result by this time next year and prices falling over five years to 100k, with 50% of that fall happening in the first two years (that is pretty much what happened last time), just enough time to save up a deposit!

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  • P4C, head down to the property auction houses as there will be plenty of ‘fully leveraged’ repossessed properties for sale at knock-down prices.

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  • Growth is fantastic, we all love that, but it just goes to show that you can’t have it all.

    Sounds like a mantra from our esteemed mortgage lenders (HBOS and their ilk)…..”house price growth is expected to continue, given high employment, good growth prospects and low interest rates”.

    Anybody spot the deliberate mistake??

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  • sold 2 rent 1 says:


    All your predictions are based on the 75+ year debt bubble not bursting.

    See debt bubble graph

    Your assumptions are based on 70s 80s and 90s HPCs where debt levels only plateaued and then increased 2-3 years later.

    If the debt bubble does burst (as it did in 1933 and 1835) and we return to debt levels of the 1950’s then the crash will be much more severe.
    My estimates are for between 50-70% fall in real terms by 2016.

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