Friday, Oct 23, 2015

What happens when negative rates occur in UK?

Zero Hedge: This Is What Happens After Three Years Of Negative Interest Rates

Property prices in Copenhagen have risen 40-60 percent since the middle of 2012, when the central bank first resorted to negative interest rates to defend the krone’s peg to the euro. Meanwhile, Draghi is speaking of more QE, lower rates and even the Fed is mulling negative rates, as commodity prices continue to collapse. But this does make sense. Lower rates entail a short time preference for money, i.e. spend now rather than invest, but that makes economic sense when production costs are collapsing whilst production levels are high with claims of excess supplies of things like steel, etc. Negative rates could mop up some of that steel production with a few more sky scrapers being built.

Posted by libertas @ 11:05 AM (6828 views)
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25 Comments

1. cornishman said...





http://www.tradingeconomics.com/denmark/housing-index

Friday, October 23, 2015 11:51AM Report Comment
 

2. sibley's b'stard child said...

Cheap credit in HPI blowing bubbles shocker.

And you're celebrating this why exactly Libby? You're an idiot if you can't see beyond your myopic greed.

Friday, October 23, 2015 12:07PM Report Comment
 

3. cornishman said...

libertas, if buying a house is such a no-brainer, how come jackc and his daughter can now buy a house for 2/3 what someone paid for it 9 years ago?

17. jack c said...
I've finally capitulated and elected to buy a property for my Daughter. Interestingly the agreed price represents a 32.5% reduction on the peak price of the property which sold on 10/11/2006.
Thursday, October 8, 2015 01:10PM

Have you given any thought to how you might feel in 2024 nursing a 100,000 'paper' loss?

Friday, October 23, 2015 12:12PM Report Comment
 

4. libertas said...

I am not celebrating, why would you think that? Unlike you, I do not have the delusion of thinking that any opinion of mine affects global financial trends, not shedding any moral opinion about whether negative rates are right or not, simply questioning the lie that rates can only go up.

Rather, I think it is necessary to view objectively what is happening and make appropriate adjustments to ensure that hot capital flows do not sweep me away.

Cornishman, those charts are interesting. They show that housing is not in a bubble, neither in Britain nor Denmark, though British values have risen further priced in Euros, but that is to be expected, because hot capital flows are running from Europe to Britain, with London clearly experiencing the lion's share. It is these very capital flows, as in the case of Denmark, that may force BOE to go negative. All it will take now is one more Euro crisis.

Friday, October 23, 2015 12:16PM Report Comment
 

5. sibley's b'stard child said...

Don't flatter yourself Libby, you've bought your gaff in Grotsville and are praying for capital gains. It's all rather grubby to be honest.

Friday, October 23, 2015 12:45PM Report Comment
 

6. jack c said...

libertas has turned 180 degrees which makes me think he has smugdog as a lodger (wink wink)

Friday, October 23, 2015 12:48PM Report Comment
 

7. icarus said...

@4 - The charts 'show that housing is not in a bubble'. Is that because prices have not gone beyond their 2008 levels? But wasn't THAT a bubble? Remember the crash?

Friday, October 23, 2015 01:05PM Report Comment
 

8. sibley's b'stard child said...

Smugdog, that name rings a bell Jack. That was one of the perma-bulls on here wasn't it?

Friday, October 23, 2015 02:56PM Report Comment
 

9. mister ed said...

"What happens when negative rates occur in UK?"

Well, Libbo, you answered that question yourself some time ago. As you once said, the trillions in national, corporate and private debt will become assets, and everybody will be rich. Frankly, house prices will soar.

Simples, yes?

Friday, October 23, 2015 04:23PM Report Comment
 

10. enuii said...

Interest only, negative interest rate mortgages all round then. Somehow I don't think so.

Friday, October 23, 2015 08:23PM Report Comment
 

11. libertas said...

Enuii, negative rate mortgages are only likely for folk with very healthy deposits.

Sibley, this is just the point I make. Most my other friends rent in places where they cannot afford to buy. Yes, my area is grotty, which is why I could afford it, but prices here have jumped about 50 to 80k since May, when the area got put on the tube map with London Overground, and whilst the area is not fantastic, we are 10mins drive to some lovely places, houses here, fundamentally, are good, with huge regeneration plans in the pipeline, and I could afford a large 3 bed house with a large garden. My major point is that most folk I know could afford to buy if they made similar 'sacrifices'. Instead of throwing 10k a year away in rent, we have paid off that much on the mortgage and made said capital gains. We have already made enough to provide sufficient additional deposit to jump to a slightly nicer area, say, Chingford, in just one year. As renters we could have barely scraped together a couple of grand in savings, if we were lucky.

Saturday, October 24, 2015 12:14AM Report Comment
 

12. debtserf said...

"Made said capital gains"

Yeah, on paper.

Try and capitalise them.

Saturday, October 24, 2015 02:34AM Report Comment
 

13. icarus said...

libertas @11 - stories like yours abound - as long as prices are rising.

You may be happy with your lot but from another perspective the neoliberal financial and political elites - main aim to enrich themselves by inflating asset prices and disinvesting from the real economy, causing poles of wealth and poverty - rely on millions like you (small investors with temporary paper profits, the ones hit in a downturn) to support their game.

Saturday, October 24, 2015 09:31AM Report Comment
 

14. letthemfall said...

Yours is a very old fashioned view Libertas. Years ago people used to think like that all the time, but in those days there was high inflation and debt was dissipated before you knew it. Now real prices are crazy, and anyone who is riding that wave crest is in a very uncomfortable situation.

True, everyone but the rich rentiers is in an uncomfortable situation, but holding a large debt to own an asset which could so easily plunge in value is not a great place to be, so must of us are stuffed anyway. If it were purely an investment matter one would have to be a bubble follower to put money in housing. As it is we all need a place to live. Capital gains you boast of will not last for ever. It's a case for you of hoping they last long enough.

Saturday, October 24, 2015 11:23AM Report Comment
 

15. mister ed said...

@11

"a slightly nicer area, say, Chingford"

It's good to not expect too much in life.

As long as you never have children and never have to deal with the frustration of watching their life chances go down the toilet as they struggle in a sink school, you'll be in good shape. And, of course, you'll never have to worry about them having to shackle themselves with huge debt to buy a place in a grothole.

Just make sure Mrs Libby doesn't get any funny ideas about starting a family.

It's a wonderful life for the sterile.

Saturday, October 24, 2015 01:19PM Report Comment
 

16. cornishman said...

Libby, I'd be interested to know if you could afford to buy the house you have now if you bought today. You say it has gone up in value 50-80,000.

If you and Mrs Libby had your present income and the same deposit that you had last year, would you be able to buy it now?

If so, would your monthly payments be more or less than you started off with last year?

Saturday, October 24, 2015 04:15PM Report Comment
 

17. libertas said...

Actually, we could have afforded it, though would not have nearly enough cash to extend it. In a few years time, no doubt, we could have only afforded a two bed house here, reverting to a flat only once Crossrail 2 comes along, and we would have had to purchase somewhere like Bexley or Barking & Dagenham to get a house. Right now, we could still afford a 1 bed flat Hackney or a studio somewhere like Crouch End, but would rather a house than a flat. We are on less than average wages. Without parental support we could still have easily afforded a flat in London, having scrimped and saved and not gone on holiday for a few years.

Just because you can't afford your own flat and think you can travel the world also doesn't mean that you can have your cake and eat it, but now that we have a home, we can afford the luxury of holidays again, given that simply paying the mortgage now has a greater impact on our finances than our previous attempts at putting money aside.

That is the cruel reality of the world.

Saturday, October 24, 2015 04:51PM Report Comment
 

18. libertas said...

Mister Ed, we actually have a nice school down the road, and in five years time, when Mr and or Mrs Mini Libby. want to go to a better school, we would have paid off more than 25% of the mortgage, but will own about 50% of it given capital gains and household improvements, so yes, we can move to a nicer place and focus on a better school.

Point is, we could never have that option had we not taken this compromise at this stage in life. Frankly, we should have made it earlier.

The 1930's suburbs are also now rapidly gentrifying because London's population has now exceeded and is soaring past its 1939 peak, and so these areas are swiftly filling up with aspiring middle class people, whilst benefit cuts are causing others to leave in droves. I state that not as a moral judgement, merely identifying a trend that I have had no option but to participate in. The same was being said about those who moved to Hackney ten years ago, that it was grotty, well, your judgemental prats, because those people, like me, had no other option, but we scrimped and saved and worked hard to make it and together these people bought up these neighbourhoods to being some of the most vibrant communities in Britain within the space of a decade, with a little help from TFL investing in the London Overground network through Hackney. Same is happening now, the past few years, in places like Peckham.

It is people like you who can miss an entire bull market, constantly calling the top, most likely investing at the peak out of panic about opportunities lost.

Saturday, October 24, 2015 04:58PM Report Comment
 

19. mister ed said...

@18

You have a lot to learn about the world.

Saturday, October 24, 2015 08:25PM Report Comment
 

20. taffee said...

Being stretched financially if okay unless one of the spinning plates falls

For example even with zero rates the bubble may burst prices fall...a relationship may breakdown and property sold
With no equity or negative equity

You could lose your job or have a health scare

God help if rates rise!...I'm just saying that at these bubble prices the risks are. very very high and don't expect hmg to help
Look what they have done to savers

Sunday, October 25, 2015 06:43AM Report Comment
 

21. cornishman said...

Libby, what I meant was if someone on your wages put down exactly the same deposit now on your house (as you did 18 months ago), would they get a mortgage and so could they buy it. Leave aside the fact that you had some spare cash to do an extension.

Obviously the LTV would be higher since they would need a bigger mortgage, but mortgage rates have fallen. I was just curious as to if you thought it would make any difference to the monthly outgoings - and if in fact someone on your wages with the same deposit could actually borrow enough to go ahead today.

Sunday, October 25, 2015 10:46AM Report Comment
 

22. Chickentown said...

@20 " the bubble may burst"

I 'm no expert. Has the bubble already burst? October 2014 to be exact. Looking at a few areas of London and South East at annual house price growth the it s a stead downward trend. Am I missing something?

http://landregistry.data.gov.uk/app/hpi/view?from_m=9&from_y=2012&loc_0=Wandsworth&loc_uri_0=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Fwandsworth&m_chy=1&source=preview_form&to_m=9&to_y=2015

Sunday, October 25, 2015 05:51PM Report Comment
 

23. libertas said...

We purchased our place on a 70% mortgage, so my LTV may have shifted, but we held back cash for home improvements.

Regardless, I did say that for those wanting to jump into the market in London, pick a place about to get on the tube map. Next ones to drop are Crossrail in 2018 (Areas around Abbey Wood), plus Stratford to Angel Road services (a new London Overground) about to hit the ground 2018 also. It is also likely that Crossrail 2 is about to get granted this November, but possibly only the underground element. The West Anglia Taskforce reports back next June I think, and so expect the overground element from Tottenham Hale to Broxbourne to be granted later. Also note, it seems that Crossrail 2 may be heading via Balham (possibly overground from Victoria, missing Chelsea). So I do not advise investing in Tooting. It may well serve places like Streatham instead.

http://www.wandsworthguardian.co.uk/news/13847133.Crossrail_2_could_be_routed_via_Balham_rather_than_Tooting_Broadway/

Sunday, October 25, 2015 09:03PM Report Comment
 

24. libertas said...

We purchased our place on a 70% mortgage, so my LTV may have shifted, but we held back cash for home improvements.

Regardless, I did say that for those wanting to jump into the market in London, pick a place about to get on the tube map. Next ones to drop are Crossrail in 2018 (Areas around Abbey Wood), plus Stratford to Angel Road services (a new London Overground) about to hit the ground 2018 also. It is also likely that Crossrail 2 is about to get granted this November, but possibly only the underground element. The West Anglia Taskforce reports back next June I think, and so expect the overground element from Tottenham Hale to Broxbourne to be granted later. Also note, it seems that Crossrail 2 may be heading via Balham (possibly overground from Victoria, missing Chelsea). So I do not advise investing in Tooting. It may well serve places like Streatham instead.

http://www.wandsworthguardian.co.uk/news/13847133.Crossrail_2_could_be_routed_via_Balham_rather_than_Tooting_Broadway/

Sunday, October 25, 2015 09:03PM Report Comment
 

25. hpwatcher said...

And you're celebrating this why exactly Libby? You're an idiot if you can't see beyond your myopic greed.

Ah, that's the solution.

Does anyone remember when Libby was an interest rate rise fanatic? Not that long ago either.

Monday, October 26, 2015 09:33AM Report Comment
 

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