Tuesday, February 19, 2008

Well done to the BBC

House price 'threat' to economy

Kate Barker, a member of the Bank of England's Monetary Policy Committee, warned that the bank would not be able to stop this in the short term. Therefore, she said, the MPC would be paying particularly careful attention to the financial and property markets. But rate cuts would be hard to justify in the face of inflationary pressures. p.s. Great! Dispatches documentary last night.

Posted by stevie dee @ 08:17 PM (1834 views)
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22 thoughts on “Well done to the BBC

  • Good old Kate Barker now seems to worry more about house prices than she does about inflation. Perhaps she should revisit her job description. Its seems if property prices are dropping this may affect grwoth which could be a serious problem difficult to turn around. Obviously inflation is a lesser problem more easily turned around.

    Don’t know why she is worried :~

    Speaking in a personal capacity, Ms Barker noted that even if house prices fell by 15%, only 5% of mortgage holders – and thus just 2% of all houesholds – would find they were in negative equity, whereby their homes were worth less than their mortgages. (SIC)

    So a crash is not a problem then Kate. Perhaps you should worry about inflation instead. If you want to see her swivel fast whilst covering all options read this .

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  • It’s an absolutely disgrace that someone would advocate greater debt in order to sustain a bubble in house price markets.

    Moreover, substantial inflation in China, will feed back into UK inflation…….especially in those areas which have helped keep the CPI down i.e. clothes.

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  • planning4acrash says:

    Yer, Chinese inflation at 7% now, and that’s just the official figure. Multiply that by appreciation of the Nrimbi and depreciation of Sterling and you have a heady cocktail. Maybe we shouldn’t have let Rover go to the Chinese afterall!!!

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  • She has just admitted the BoE are targeting house prices;

    “In this case, the mortgage market could become less competitive and more expensive, feeding back into a decline in the housing market, somewhat lower consumer spending, and also into lenders’ balance sheets, reducing lending capacity further.”

    She wants to fuel the bubble even further to maintain or increase consumer spending on the back of a housing debt bubble. Jeez, she’s a clever lass aye!

    Houses are over 7X salary multiple, what in gods name does she not understand. It can’t continue. The future of the British economy hinges on the housing market alone according to her. Stupid, stupid. They are all muppets. This article and last nights Ch4 Dispatches program confirms it. God help us all and I am an atheist but I think we need all the help we can get.

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  • @hpwatcher & p4c, in truth, what can these guys really do or even say, I mean the outlook isn’t exactly rosie. Incidently, my food delivery driver & fast food shop owner (afghani). Told me tonight he is thinking of closing the shop, I said to him, “what are you going into next? please don’t say you are going into property”, he said “yes, property in the UK always goes up, never goes down”. I tried to advise him, but hey. He might be right… 😉

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  • They have posted this at 9.30pm though – lets see if they keep it there until 9.30am …

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  • AND they now have completely contradicting stories on their site –

    Mortgage rate rise shock fades:
    http://news.bbc.co.uk/1/hi/business/7252396.stm

    House price threat to the economy:
    http://news.bbc.co.uk/1/hi/business/7253527.stm

    Which is it then? Oh the BBC provides some ‘analysis’:

    2008 PREDICTIONS
    CML +1%
    Halifax 0%
    Nationwide 0%
    Rics 0%
    John Charcol -2%
    Capital Economics -5%

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  • Uaaahh. I dropped off the blog window!

    Help I’m falling !

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  • This woman is part of the problem, and clearly NOT part of the solution. It’s thinking like hers that created this mess in the first place. I think she should go, and go now.

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  • Barker seems confused as to what the remit of the MPC actually is.

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  • planning4acrash says:

    Maybe she’s worried about her mortgage!

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  • I agree with the comments so far. It’s so depressing to hear a member of the MPC admit that we rely on house price inflation for our economy – especially after nationlising Northern Rock.

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  • What a shockingly stupid statement from this woman. Is she really proposing that house price speculation becomes a one-way bet ?. Does she really believe that the UK economy is, and should continue to be, founded on everyone bidding up the price of each others houses ?.
    This sounds worringly like the MPC are being persuaded by NuLab to addopt the Northern Rock business model for the UK economy.
    .

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  • The despatches program confirmed in my mind that hte BoE are overpaid idiots rather than shrewd businessmen. They really do need to read this site to learn a bit about economics. Shocking really. You expect lies and bluster from politicians, but you’d hope the real men in charge would have a bit more substance.

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  • Remember, the MPC previously considered that rising house prices didn’t matter when setting interest rates.

    Now it seems, falling house prices do matter when setting interest rates.

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  • Kate Barker is one of Gordon Brown’s ‘experts’ (obviously his appointee to the BoE Monetary Committee).

    She is the author of the Barker Report on housing, which is fuelling the exaggerated supply shortage mantra espoused by the Govt. The 3m new homes that aren’t really needed. These experts tend to take a linear and ‘happy ever after’ approach to analysis. The other idiot is that
    Stephen Nickell, chairs the NHPAU, with his 10x salary prediction for mortgages (June 2007)

    The shortage is debatable:
    30Oct07 from the Times
    Shortage? What housing shortage?
    The Times: Why are they empty?
    “[…] The Empty Homes Agency estimates that there are 840,000 empty homes in the UK. National Land Use Database figures indicate that a further 420,000 homes could be established in disused commercial properties in England, including former pubs and space above shops. This adds up to more than one million additional homes – which would make up a third of the Government’s three million target.”

    Up and down the country, this report has contributed to over-supply in many areas of the country (up North: Liverpool, Leeds, Manchester…), with Councils bending over to allow building when local UDP plans show that there is ‘enough’ supply, that targets have been met and that perhaps local infrastructure and services should be considered properly first. The problem being that the excess supply is being taken up by the BTL speculators with the consequences of HPI, mortgage fraud and bursting credit bubbles.

    Another example of her ineptitude and typical and frightening example of Labour thinking on housing and house prices

    24 May 2007
    BOE Barker: Low Rates Key Reason For UK House Price Gains
    “You wouldn’t immediately assume that a fall in interest rates would make housing less affordable,” Kate Barker said. “It would, of course, raise prices, but given people wouldn’t have to pay as much for their mortgages, they’d still be able to afford them.”

    The woman is a retard with a key and influential role in govt, unfortunately!

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  • new user 2007 says:

    Just another MPC member talking about how “seriously they are taking inflation” just before they cut rates. Mervyn King was also serious about inflation in January and then cut rates anyway. They are talking to consumers to kid them into believing they should not increase their inflationary expectatations, while cutting to keep their City and govt buddies happy. I expect them to cut in the MPC meeting after next, regardless of price trends.

    She is just concerned that house price growth will fall (the MPC target of 9%?) to too low a level. The implication is that she has no problem with a debt driven economy and resources going into non-productive investments. The entire policy response is to keep lending as free as it was and that the problem is merely that lenders cannot…she is not saying that risk was being mispriced and so too much debt was given to begin with, just that it will be unavailable..

    The process for FTB from now to the next 20 years is a slow one. To buy requires high income multiples and no ability to repay capital or save for a pension. This goup will take over the population i.e. from 2005 to decades from now…if the housing market continues as is no one will have any extra cash as they will represent the majority of the popn as the older “lucky” group dies out.

    That means consumption will collapse in about 15 years as most people spend everything on debt (the credit can only go so far) BUT by then the MPC will have retired so they do not care. The BoE policy is a very slow process with massive implications, but not for them. Oh well, once the baby boomers die (in about 25 years there will be a surge in properties on the market because of that), perhaps FTB will get affordable housing again.

    Of course, given the liquidity crisis is here, the above is what the BoE wants, not what I think will happen:)

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  • new user 2007 says:

    I do not mind them linking lower house prices to a slowing economy and so lower inflation. This would of course mean allowing lower rates while taking into account the time lag before the economy responds to these lower rates.

    BUT it defies belief that the oppositite logic did not require a rate rise i.e. rising house prices result in more economic growth and so higher inflation and thus the need for higher rates. This never happened.

    IF they had ever assumed there was such an economic chain when house prices were going up I would accept what they are saying about housing now, but they are not…

    They are also saying that confidence is suffering via what is happening in housing and credit markets but, as mentioned earlier, this is just a return to real pricing of debt and risk. What is the problem then!

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  • Cristiano Barbaro says:

    Excuse me you all, but what if the precise aim of the bankers, the financiers and their puppets in the govt/mpc IS that of bankrupting the UK so thoroughly, so as to breakdown all resistance when it comes to joining the new USSR, i.e.: the EU?

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  • Barker by name barker by nature. I share this forums incredulity at her comments.

    Barkers actions are typical of NuLabour’s hypocracy and shows how dangerous Barker and NuLabour are. They deliberately confuse and manipulate what is a fairly clear remit, inflation targeting, to achieve the only target that counts for them “getting re-elected” at ANY expense, even if that means debt slavery for the young, starvation for the old and a generation of savers who will have nothing to show for their prudence other than soon to be worthless paper called Pound Sterling.

    NuLabour are morally corrupt and are soon to make the whole UK bankrupt.

    When will the media wake up to what is actually happening rather than lazily spouting verbatim what the government tell them?

    HAL

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  • The usual garbage from the BBC (a public service – yeah right), which has still not woken up to the fact that it is high inflation, not falling house prices, that is crippling the British economy.

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  • Any one who studies investments will have it drummed into them the necessity for a diversified range of investments in a porfolio; not putting all one’s eggs in one basket.

    When UK PLC decided that enterprise in manufacturing and trading was beneath it and that the only worthy or respectable investment was property it exposed itself to great danger, danger that everyone here on HPC have understood all too well from the start. Britain is about to pay the price for that narrow-minded arrogance.

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