Thursday, July 10, 2008
“A 30 per cent decline in real prices would hardly be surprising.”
"Spreads over the Bank of England’s policy rate are now higher than the 1997-2003 average, just as they were well below that average until the current crisis began. Moreover, many borrowers are being rationed out of the market altogether. The biggest issue, then, is not the fall in house prices itself but the transformation in credit conditions that lies behind it. Yet even here the evidence is mixed. Between August 2007 and May 2008, both the number of housing loans and their total value did shrink by close to 50 per cent, according to the council of mortgage lenders. Yet so-called 'M4 lending' – the counterpart of the broad measure of money – rose by as much as 12.4 per cent in the year to May. This does not look like a general credit squeeze, as yet." -- So where is the M4 money going??