Thursday, January 13, 2011

Bear Nibbles

Interest rate misery for home owners

"Three million people would struggle to pay their mortgage if interest rates rose by just 1 per cent, new research has disclosed. It comes amid widespread speculation that the Bank of England will raise interest rates this year from their current level of just 0.5 per cent, where they have remained for the past two years. Home owners have enjoyed historically low rates in recent years, with many avoiding repossession as a result. But experts suggested a rate rise would cause “major problems” for millions of home owners who would struggle to keep the roof over their heads."

Posted by mark wadsworth @ 10:41 AM (2564 views)
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17 thoughts on “Bear Nibbles

  • sibley's b'stard child says:

    Subtext: ‘We know you’re meeting today MPC; you know the drill’.

    Gah!

    Don’t increase IRs
    Don’t repossess
    Don’t take away SMI
    Don’t cut HB
    Don’t ration credit

    Ad nauseum

    That’s all I hear from the press these days, thinly-veiled VIs shaping (or attempting to) govt policy. Really boils ma pish.

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  • mark wadsworth says:

    SBC, good point on the timing.

    Halifax used to delay their monthly house price index until the morning of the MPC just to put the pressure on, which alerted me to the fact there would be an MPC announement that day. But Halifax reported ‘early’ this month so I’d forgotten about MPC.

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  • sibley's b'stard child says:

    You could be forgiven Mark; they’re a largely forgettable entity these days.

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  • @MW – I thought Halifax were quite late this month compared to others. Normally there figures are out the first Thursday?

    Having worked with press for a while, I noticed a trend that we called the 10% article. For every ten pieces of positive coverage we received in the media, the 11th would try to be different and approach the subject with a new (often negative) angle. Rather than being frustrated, I learned to view that as smart journos being one stage ahead of the competition and keeping news fresh.

    On the subject of HPs and the economy however, this country’s media are hopeless. Most news on HPI is cut & pasted. There is little to no analysis of what high HPs can do to a country long-term, priced out younger folk etc. I blame this on budgets being trimmed by the amount of free news there is online and journs only having time to regurgitate rather than investigate. Sure, there is a lack of education and basic awareness of bubbles – but it’s only 20 years since the last one popped and I hoped the media’s role would be to inform the country rather than bow to their ignorance. I’m just too optimistic about a country where Cheryl Cole is regularly front page news…

    Going off on a tangent, I get riled up by Yanks who say their country has a biased left wing media. It took US journos two years to question the basis of the Iraq war – by which time it had gone pear-shaped and Bush was back in the White House. Back over here, six months after it kicked off, Blair was fighting for his political life…

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  • Only 7-8% of the UK homeowning population would be facing negative equity if a 50% housing crash were to occur. [The people who got onto the ladder during Browns ‘fake’ boom] So, unless a 50% crash occurs, there will be a LOT more voters ‘priced out’ of housing than those facing negative equity by the next General Election in 2015.

    An important difference between this bubble and the late-1980s bubble is that this time there are a lot more buy-to-let speculators. These people are highly leveraged (their debts are high relative to their assets) so small changes in asset prices make a big change to their situation. As it becomes more difficult to borrow money, many of these people will find that they cannot refinance at affordable rates when their ‘teaser’ rates come to an end. The long term average Base rate is at 5%.

    When IR do increase, the BTL investor, will not be in the position of the homeowner with negative equity, but an affordable mortgage, who can afford to hang on as long as he doesn’t lose his job, or move house.

    The speculators will have to lower their price to sell.

    The problem here, is that the government are stealing the money from the rest of us, in effect to pay for others peoples houses. And the bank bailouts have given the banks, and government, an opportunity to engineer a soft bottom in the housing market.
    It beggars belief. There is No difference between this and robbing me in my home. This is nothing short of economic fascism.
    The Labour Party created this mess. But the coalition are not acting fast enough to rectify this situation.

    STOP PUTTING PARASITES AND BANKERS BONUSES AHEAD OF NORMAL HARDWORKING PEOPLE.

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  • this article is just a thinly veiled advert for MarketGuard insurance. It’s what they call a bandwagon article.

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  • general congreve says:

    They’ve held at 0.5%, surprise, surprise. You heard it here first.

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  • @GC – Managed to get that posted in the forum at 12.01!

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  • No need for feckless home “owners” to worry.

    Aunty Merv will keep interest rates low for you so you can still afford that 55″ telly.

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  • sibley's b'stard child says:

    7 & 8

    What a surprise. The only thing that remains to be optimistic about is the prospect that Sentance might have at least roped-in another member. Probably not, mind; 8-1 split all the way.

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  • And your savings are become worthless.

    Bricks and mortar my friends, bricks and mortar I say, with trinkets, ornaments and charms to furnish.

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  • sibley's b'stard child says:

    By the way RnR, what is the Youtube clip (can’t view it)?

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  • general congreve says:

    @11 – Holding interest rates low might give more breathing room for homeowners. But the inflation is causes in the everyday goods people buy just puts pressure on incomes, so there’s less spare to pay rents and mortgages. Coupled with a (sensible) lack of bank lending and the cuts starting to bite and you have a recipe for the housing bubble deflating.

    However, if you’re sitting on the side line getting negative real interest rates on your carefully saved deposit awaiting the crash then any fall in prices will be offset by inflationary pressures to the contrary. So the situation still isn’t great.

    As for trinkets and charms, stay away from that 9ct Argos stuff. You’re going to need the real deal to get through the mess Merv is busy cooking up.

    BTW, currently watching BBC News. News very bearish about the cuts and John Redwood saying the MPC are muppets (effectively) and low interest rates are just for the benefit of the government and banks.

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  • told you so it wont change till august or september then only by .25 to .5

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  • Is there any more evidence we need that this paper has an agenda.

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  • Bear Nibbles?

    Sorry MW, my palate prefers more spicy fare, evidence of a 10% drop in house prices would be more to my taste!

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