Tuesday, July 23, 2013

Pump and dump begins the pump phase in earnest

Mortgage approvals hit 17mth high as Osborne hosts help to buy meeting

Fill your boots - last chance to get suckered into a failing asset class.

Posted by chrisch @ 10:13 AM (2790 views)
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33 thoughts on “Pump and dump begins the pump phase in earnest

  • mark wadsworth says:

    It’s all very depressing.

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  • If you can’t beat them…

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  • mark wadsworth says:

    … shoot them.

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  • it’s beginning to make me laugh. It’s such economic suicide, but at the same time it just doesn’t seem to stop.

    Will this market ever correct?

    Do markets ever correct – or it is really different this time?

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  • I am all for it, I wish they would bring back the 125% mortgages and make property prices rise 50% yoy.

    When it finally blows up Ireland style, the population will realise how stupid they have been which will put the breaks on the madness for once and all.

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  • mark wadsworth says:

    Khards, if and when prices collapse, will your return to the UK or are you starting to like it over in Ireland?

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  • I can’t see me moving back to the UK unless SHTF here in a big way like work drying up, 100% tax rises or a total collapse (which I would not rule out). If sterling fell to parity with the Euro and UK house prices dropped 30% from here it might be worth considering from a financial point of view.
    I quite like the peace and quiet of Ireland, its nice to be able to stroll the country lanes of an evening, go fishing in the loughs. One of the things we were trying to escape (apart from property prices) was the hordes of chavs, unemployed, Slovakian immigrants and other down and outs that we were being forced to live amongst because we could not afford to live in a less densely populated areas.

    So in a word, no – it would take nothing more of a complete collapse 50% (sterling and or property combined) for us to consider moving back just from a financial perspective. Obviously there other perspectives such as friends and family which you cant put a value on.

    Another thing is what is there to move back to?

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  • sibley's b'stard child says:

    Agreed #1

    ‘Er indoors has been making noises regarding the Help to Sell scheme. The conundrum the HPCers face is how do you convince the wider public when everything successive govts have done to maintain nominal asset prices have indirectly confirmed your status as a know-nothing nutter.

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  • mark wadsworth says:

    Khards, thanks for update, I’m glad you like it over there.

    SBC, well obviously we are know-nothing nutters. We thought the govt couldn’t buck the market but it did and has been doing most successfully for over a decade.

    I’m even worse – I thought that I could explain to people that the whole thing is a huge great scam and that they would vote for something better but have failed miserably so far.

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  • So, how high can ‘leveraged’ asset prices go? Well it depends on how much it costs to borrow the money.

    in 2007/8 the cost of borrowing had ‘fallen’ to around 5% to 6%. Since then the cost of borrowing has fallen to around 3% to 4% (65% ltv).

    Can the cost of borrowing fall much further?

    All it will take is a default / non return of capital (bank run, bankrupt country) before savers/investors demand a substantial increase interest rate to cover the risk of holding money in the banks.

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  • im wondering if this is the “winners curse” phrase part 2. If so then – relatively speaking this should be a short sharp spike (although in property terms “short” could be a while yet at least until the next election). Its when things stop going up when the WTF moment sets in an there is distribution and exit heading.

    Im not surprised that George has done this nor that jo pubic is lapping it up. But surely people can see this for what it is – a bribe to vote Tory at the next election and a massive gamble with OUR money.

    However, as Khards says there are better / more sensible places to live and thats even before we have an influx of the A8 inhabitants at the beginning of next year.

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  • stillthinking says:

    If you live abroad then UK house prices have already collapsed and will probably collapse further with the currency. Not sure what kind of message that sends out. I

    However, I don’t think the massive increase in house prices is a trick you can play twice for the UK. I think its better to just clear steer of the whole thing. I don’t see anything good coming and it will be interesting to see how all the losses are dealt with. Evans Pritchard published a mainstream article saying that Southern Europe should gang up and go into default and of course they should. You have to go back three or four years to get the juicy exposure details of the UK banks to Portugal debt.

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  • Son_of_mountaingoat says:

    Hello hpc’ers. I personally bought a house recently mainly because of the wife whining about schools for the children. That doesn’t mean I am pleased sales are up. I think the country would be better off with a hpc (to kick the debt habit), although that would slow new-build further. I still think a hpc will happen someday and that is why we bought something cheap so as not to be over-exposed. My own view is that this latest gov scheme is not the reason for a jump in sales (although Ozzy will want people to think so), but rather the low mortgage rates. Historically low 5 year fixed I read recently. My interest rate is only fractionally above inflation rate for example, although admittedly we had a fair deposit.

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  • The next election is most likely in 2015 and the HTB scheme is due to end beginning of 2017. So the new government will be 1.5 years into their term and already thinking about re-election. Chances are they will renew the scheme and our tax money will keep guaranteeing people’s mortgages until (if) large scale defaults cause the public to be outraged. Bankers will win again either way.

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  • The next election is most likely in 2015 and the HTB scheme is due to end beginning of 2017. So the new government will be 1.5 years into their term and already thinking about re-election. Chances are they will renew the scheme and our tax money will keep guaranteeing people’s mortgages until (if) large scale defaults cause the public to be outraged. Bankers will win again either way.

    depends whether the funding will be available….might not be.

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  • As I tried to explain the other day but I don’t think I got the point across very well, I just don’t understand the sense of the following two things happening simultaneously:

    Since the beginning of the credit crunch (let’s say late 2008), we’ve been told (at least unofficially) that one of the key reasons – if not THE key reason – for the BoE MPC keeping the base IR so low is that if they didn’t banks would raise the IRs on debt and mortgage repayments and, since so many people are so deeply in debt (especially those who, by fair means or foul, maxed out their LTV potential to buy a very expensive house in the last few years before the crunch), this would lead to absolute carnage: a tidal wave of repossessions and personal bankruptcies. So, the answer is, “Sorry savers but we have to keep IRs low to help/save the excessively indebted”.

    Meanwhile, the government create and promote schemes that encourage other people to join the ranks of the heavily indebted by, in the case of “Help To Buy (Sell)”, taking on, in effect, two mortgages. These new recruits to the ponzi scheme will, if anything, be even more vulnerable to any rise in the cost of servicing their eye-watering debt so they, too, can’t possibly afford to see the base IR rise. What we (they) are doing with the “Help to Buy (Sell)” scheme and the like is swelling the proportion of the population that teeter on the edge of a financial precipice. So, no matter what (whatever the wider detrimental effects to the country, the economy, groups other than the excessively indebted) IRs MUST not be allowed to rise because … well, they just can’t. And if something comes along that is beyond our control that means IRs MUST rise? Well, obviously that just doesn’t bear thinking about. That’s “Game Over” time.

    But what do I know.

    After all these years of thinking that house prices must fall (I never expected a crash, as such, but I did expect a dramatic downturn in house prices versus incomes), I honestly don’t see any reason to conclude that it has to or will happen. Somehow they have managed to keep this desperately unseaworthy ship afloat this long so for what possible reason should we assume that this can’t continue indefinitely? Who knows, maybe subsidised buying will lead to more building will lead to ‘general’ economic growth will lead to greater consumer wealth (and therefore) spending and so on. I don’t know. In fact, clearly, I don’t know anything because if you’d asked me 1, 2 ,3, 4, or 5 years ago, “Can house prices go up while the conditions that caused the crash are so, essentially, the same, while the real income of most people has been in decline for years and the cost of living ha, at the same time, risen at a shocking rate?” I’d have said “Of course not. Don’t be so stupid!” But, clearly, they are managing to do it. It may be voodoo and it may all end in tears but they are making it happen.

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  • mark wadsworth says:

    Grumby Bob: “It may be voodoo and it may all end in tears but they are making it happen.”

    Agreed.

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  • sibley's b'stard child says:

    True MW, how to convince people so entrenched in their ways; despite those ways being far from in their best interests?

    “A long habit of not thinking a thing wrong, gives it a superficial appearance of being right..”

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  • The surge in prices in south west London is due to inward investment:

    a. Chinese money as they are worried about the change in leadership and want their money safe
    b. European money as they want money out of Southern Europe at the moment to avoid a Cyprus type confiscation
    c. Arab money because they have to spend it somewhere

    This is getting the rest of the home owners sucked in who think the market is now on an upward roll. hence people are taking out bigger mortgages and moving up. This is then making people believe in the rest of the UK that prices are going up, and the vested interests are cheering all the way, when common sense shows that people are poorer and there is no economic reason for them to go up.

    What people don’t realise is that for a normal buyer with a mortgage a house is a relatively illiquid asset, but for foreign cash buyers London property is a relatively liquid asset. If they decide to sell on the cheap for a 10-15% discount they can be out quickly, if they want to sell at auction, they can be out in a couple of weeks and stamp duty whilst painful is not a huge cost. If in a couple of years property looks like it is topped out, the Euro zone crisis boil has been lanced and other areas look more attractive there could be a stream of outward investment. If this sends a negative wave through the indices, like sheep people will realise that prices are way over the prices they should be and the mood will change.

    We are possibly in one of the longest, man made bubbles in history, but history tells us bubbles do not last for ever and the last dead cats bounce is the most irrational and stupid. If we want a house price crash, we should pray for crazy house price inflation over the next few months as the fall will be much harder.

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  • @9 Mw, I think you should go ahead and buy that overpriced house, so you can kick yourself and worry about the negative equity for the next 20 years 😉

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  • We are possibly in one of the longest, man made bubbles in history, but history tells us bubbles do not last for ever and the last dead cats bounce is the most irrational and stupid. If we want a house price crash, we should pray for crazy house price inflation over the next few months as the fall will be much harder.

    Yes, the whole thing defies basic logic, and it will be ugly. But when – that’s the vital bit.

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  • @hpw – “But when – that’s the vital bit.”

    All I can say is that we are closer to that moment than ever before.

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  • mark wadsworth says:

    Khards 20, people like SBC and me are fighting a losing battle against the Homeys’ ultimate secret weapon, Her Indoors.

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  • The price of gold has finally bottomed and will be making the march very high northwards in the near future. Money is leaking from the stock markets and into commodities. The bond market is just about done for, the stock market just has the retail market pushing it a little higher (smart money is selling) and each and every corner of the globe has financial problems, big ones. The day of reckoning is fast approaching and in my honest opinion I think the 2008 crash will seem like a mere hiccup. Expect an inflation spike, a continued bond market crash and forced higher interest rates and a stock market crash with some big name banks going bust. I don’t think we can bail them out again!

    Sit tight, patience is a virtue, the next property bust is not too far away and if you are smart you will put your hard earned money into gold, make a tidy penny and keep it safe until you can pick up some bargains in a year or 2!

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  • happy mondays says:

    mw – sbc – Think about all the new shoe’s you can have with the saved money Trick, it’s worked for me.. However time is running out !

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  • mark wadsworth says:

    HM, that’s what I keep telling her – but the problem is, prices are holding up or even rising slightly where we live, so she can say, quite justifiably, that’s she’s now had to forego a thousand pairs of shoes already.

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  • Justwatching says:

    Hello.
    Mostly watch. Don’t often post. I’ve not bought a house, sold in 2005, then the twisty ones lowered the interest rates to rock bottom. Her indoors has bought into the concept of waiting, so I’m not under the pressure that some of you are.

    One thought that keeps me warm at night is the cost of repaying the capital. Cheap loans are one thing, but paying 150k for a shoe box, over 25 years, 6k a year on the capital, £500 per month. That’s a lot of dosh, then the interest is added.

    I don’t believe that prices can go much higher. Too much capital to repay. But what do I know, I’ve got premium bonds.

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  • What is the costs of renting like in the area you want to buy in? When we sold our house in the UK and rented, we found that we could afford to rent houses that we would never be able to afford – you know they type of houses in nice areas that are usually on the market for years at an overinflated asking price.
    I guess we came to the conclusion that we would never buy another home that was compromise, and with property prices being so high we could only afford to buy poor condition houses in rough areas.

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  • mark wadsworth says:

    Kh, at the moment, the rent is OK compared to anything else, but when the lass starts her new school we might move to make it more convenient etc.

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  • Last time I looked gross rent yields were about 5% my way, or just under. So if you can get one of the cheaper mortgages – 2.6% or so – then buying is cheaper, even with fixed costs. Unless of course prices fall. That’s the bind we’re in.

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  • @MW – “Khards 20, people like SBC and me are fighting a losing battle against the Homeys’ ultimate secret weapon, Her Indoors”

    Indeed.

    MW, in a post about stamp duty a few weeks ago I stated that I was forced to pay a certain price for a house and I think you replied said no-one is forcing you to buy at that price. Well her indoors was the reason why!

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  • mark wadsworth says:

    Phils, that’s true – but who or what was forcing Mrs Phils to force Mr Phils?

    And as it happens, as terrible as SDLT is, it comes off the price of the house.

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  • MW, I cannot begin to understand the workings of the female brain and Mrs P’s certainly does not respond to rational or logical argument.
    I tried to convince her that patience is a virtue and that good things come to those who wait but she does not subscribe to this philosopy.
    Alas, as most of us have experienced, her indoors invariably gets what she wants. Good luck to those who continue the fight!

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