Tuesday, February 24, 2009
Northern Rock’s revival won’t kickstart the property market
Northern Rock’s revival won’t kickstart the property market
Northern Rock is back from the dead and being unleashed on the public once again. But this latest attempt to revive the housing market won't work, and prices will keep falling for some time.
Posted by damien @ 11:54 AM (871 views)
4 thoughts on “Northern Rock’s revival won’t kickstart the property market”
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Goldman555 says:
It is really interesting to me about how shocking the amount of money seemed when there was a run on Northern Rock way back when. Now it seems like what the government actually did wasn’t too bad..
However, this move to increase lending is ridiculous attempt by the government and shameless ramping by the BBC
a saver says:
I so hope they’re right but they have been wrong about a few things before….
stillthinking says:
The difference between 100% mortgage and 90% mortgage is more than the 10% it appears.
As a reminder, because this was posted years ago, going from 90% to 80% -halves- the possible purchase price. (10K deposit @90% = 100K, but @80% =40K).
BUT, moving from 100% isn’t the same kind of adjustment. 100% means that -any- level of loan is OK. So going to 90% puts a restriction on prices where there was -no- restriction previously. They cannot “kickstart” a market historically priced according to 100% LTV unless they reintroduce 100% LTV, which they aren’t.
Quite possibly they have realised that even 75% is a killer, because for FTBs suddenly a saving requirement (with loss of consumption) is introduced. Suddenly buyers need to save 20-30K to get even near a current priced flat. With credit card debt, student loans, unemployment, that is years away.
Maybe a more forgiving LTV will cause higher prices at the bottom, but even so, currently they are still behind the curve, because prices are still too high against 90% so the decline will continue. Tragically, they are too dopey to realise that the best way to generate house price growth is to hasten the arrival of the bottom, no interest relief, no legal barriers to foreclosure. Go for a shorter 3 year cycle instead of letting it drag out.
sneaker says:
As has been said elsewhere, it is indeed a sign of the times that the mere absence of a bubble feels like a disaster.