Tuesday, December 11, 2007

Pundits are capitulating… we are heading for a crash!

Mortgages most expensive for 16 years

'There is undeniably a very real - and growing danger - that the housing market could see a sharp correction next year. Probably the biggest risk is that the economy slows sharply over the coming months and unemployment starts rising significantly. 'This would be liable to lead to a marked increase in the number of people having to sell for distressed reasons, particularly given the extent to which many households have had to stretch themselves to the limit to buy a house.'

Posted by confused76 @ 01:58 PM (683 views)
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5 thoughts on “Pundits are capitulating… we are heading for a crash!

  • ”’…the potential impact of higher monthly payments will be diminished by the fall in bank rate this month and other rate reductions to come early in the New Year.’ ”

    In your dreams…

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  • I like the way the CML are confidently predicting interest rates are going to be reduced at least twice more, completely ignoring the fact that infaltion is going up. Maybe we’ll find MPC have decided to abandon all credibility and not worry about inflation if HP are at risk.

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  • But interest rates were 15% back then, that’s why it will be different this time, everybody said it was cheap, how can this possibly be??? 🙂

    17.6% of take-home pay just on the mortgage INTEREST alone – amazing levels of stupidity in this country, shame we can’t run our economy on our rich resources of dumbness and herd-following!

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  • Sold My Soul To The Never Never Never says:

    One of the reasons I think that things will be different this time is that when interest rates hit their peak in 1990 they only stayed there for a short time – I remember paying a mortgage of 10% in 1992 (with the exception of Black Wednesday when they went to 15% for a FEW HOURS). The thing this time is that we hit a new low of 3.5% which was not the norm and people piled on the credit – we are now what I would consider to be in normal territory. The fall out is not only the interest payments on the debt but the vast size of the loans – how is anybody supposed to pay them off – unless the agenda for the BOE will be to lower interest rates further and to allow inflation to occur in order to erode the debt.

    Another point to note is that in the late 80’s/early 90’s the first 30K of the mortgage was subject to MIRAS i.e. a 15% mortgage would have been 11.25%. In 1992 when I paid a mortgage rate of 10.6% – when you take into account MIRAS the actual Mortgage Rate is 7.95%. This being only 0.5% more than SVR’s today. First Time Buyers would not have had a mortgage much bigger than this as Building Societies would have stuck to the income ratios of 3x first salary or 2.5x joint salaries.

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  • Sold My Soul To The Never Never Never says:

    Referring to my last post I concluded that interest rates in 1992 are more or less the same as the SVR’s of today if you factor in MIRAS (and the fact that a lot of people will not be able to get an attractive rate due to the credit crunch) except that the average FTB property is 4x more expensive than 1992 – have wages gone up by the same rate? Now hang on to that thought – we’ve all been taken to for a ride!!

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