Thursday, June 11, 2009

NegEq affects the pattern of demand and supply in our economy

Bank of England says 1.1m Homeowners in Negative Equity

The number of homeowners whose mortgage is more expensive than the value of their property has reached the peaks of the 1990s recession in just 18 months. In the last recession, "it took almost six years" to 1995 for the number of those in negative equity to hit 1.1m, the Bank said in its quarterly bulletin, to be published on Friday.

Posted by alan @ 09:15 PM (1479 views)
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14 thoughts on “NegEq affects the pattern of demand and supply in our economy

  • ‘Negative Equity’ sounds so nineties.

    Can’t we call it something more fashionable, something more up to date like ‘Unappreciating asset’ or ‘Nequity’ or a snazzy-sounding euphemism like ‘hitching a ride on the property snake’?

    Would sound so much better in the media.

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  • “Containing the negative equity problem is vital to the country’s economic health, the Bank stressed.”

    Err. No, its probably vital to central bankers’ pension pot economic health though …

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  • How about ‘equitably challenged’ to be politically correct.

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  • The Yanks use the term ‘underwater’, as in the example, “Fannie to Aid Underwater Loans”.

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  • mark wadsworth says:

    Frankly, this is drivel of the highest ordure – we hit a million several months ago, it’s more like two million by now (and counting).

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  • crash bandicoot says:

    How about “bubbled over” instead of “negative equity”? Another thought – have some property investors become property outvestors now?

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  • I’ve just been looking at Alice’s blog and I am STUNNED at the revelation from Andrew Sentance:

    “Over the last nine months, the Monetary Policy Committee has been focussed on providing support to demand – through dramatic and unprecedented cuts in interest rates over the autumn and winter – and more recently through our current policy of “Quantitative Easing”.

    This programme of substantial asset purchases aims to boost the money supply to support spending in the economy, going beyond the stimulus that can be provided by very low interest rates.

    I am confident that these policies will help to support economic recovery – through their effect on asset prices, financial conditions and ultimately spending by households and firms.”

    Ummm, isn’t that what created the mess in the first place, and isn’t that EXACTLY what Mervyn King’s predecessor Eddie George warned the Bank of England not to do:

    However, he later admitted that the Bank had deliberately stoked the consumer boom that led to spiralling house prices and personal debt in order to stave off the onset of recession.

    “We knew that we were having to stimulate consumer spending,” he said. “We knew we had pushed it up to levels that couldn’t possibly be sustained into the medium and long term.”

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  • @devo.

    ‘Underwater’ sounds like a good candidate.

    Oh, I can see that might not always work though …

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  • “The Bank used three methods to calculate negative equity, which resulted in estimates of 700,000, 1m and 1.1m, or 7pc-11pc of Britain’s mortgage borrowers.”
    I wonder how many man-hours that took – they could have surveyed people on this site in 30 minutes and we probably would have come up with a similar range.

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  • “In the last recession, “it took almost six years” to 1995 for the number of those in negative equity to hit 1.1m, the Bank said in its quarterly bulletin”.

    Doesn’t that mean that this recession is panning out to be a more severe – but speeded up version of the last one… so logically that means the recovery will kick in earlier and take place more quickly as well?

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  • Paul @ 7 Ah, but you forget, they won’t make the same mistakes this time… 😉

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  • george monsoon says:

    listening to the news this morning, the figure reported was 1.9 million ….. or 1 in 9 people with mortgages ( I don’t want to use the term homeowners, because this only applies to those who have paid off their mortgage)

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  • I know but estate agents, banker are still talking about supply and demand and not income to loan value.

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  • Cantongoat – No it dont mean that. But that is the mistake that lots of people could very well make. The background to the nineties crash was different.

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