its not that they refuse to lend to people - they simply cannot afford to lend to people, especially considering all the mislending (made up word) they have made in the past 10 years.
House prices..
- Thread starter fendi
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its not that they refuse to lend to people - they simply cannot afford to lend to people, especially considering all the mislending (made up word) they have made in the past 10 years.
Either way, it's still not beneficial to anyone, which is kind of the point. Many people wanted a crash or price drops because they misguidely thought it would benefit them. All along I've said that if prices dropped, it would only be because something changed that meant people could no longer afford to buy, and for a sustained drop it would have to be a long term situation where large numbers of people who previously could buy would no longer be able to for an extended period of time. I failed to see why this was a good thing before, and I stand by that view that, as we appear to be entering that very situation, it's not a good thing now.
Prices dropping is a good thing inasmuch as it was completely unsustainable to have an economy dependent on increasing its indebtedness by 9-10% per year when GDP was only increasing by ~3% per year.
The longer it went on the worse the fall out was going to be.
It would have been far better to not have the asset price boom we've experienced over the last decade at all however.
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Largely true, but it does benefit some people.
It benefits those who will be looking to buy in a few years time with a salary large enough to get a good mortgage and with enough savings to put down a hefty deposit.
It also benefits those who have little mortgage left on their property and who were looking to move into a more expensive house.
But generally, a lot of people will find that the solution to the high prices is also a problem in that it stops them getting a mortgage!
it is a good thing because we are starting to get back to economic reality, rather than the debt fuelled fantasy of the last 10 years - people just don't realise that they were living a lie fuelled by taking on ever more amounts of debt. Those people have been losing for 10 years - they were just fooled into believing they were better off because their house was 'worth' more.
Now people will realise that debt is simply mortgaging the future for the present, and the future is approaching fast.
http://www.guardian.co.uk/business/2008/jun/09/housingmarket.houseprices - yes, it's over 4 years, and yes it's probably a complete prediction, but is it likely?
Indeed, just a little bit worse than the '89-'94 crash (20.1% nominal and ~37% real terms). That sounds about right to me.
Wow, this almost sounds like Dolph has woken up and is accepting that prices are falling - of cause he muddys the water talking abut whether people benefit and adds the caveat explaining a how he'd said all along how it could happen.
So do you now think we're seeing something more than "stagnation" or "slight falls"?
I always said that it was a possibility if the housing market was subject to an external shock (say, like the credit crunch), and I've also always said that falling house prices will not benefit people the way many want to believe because it will not happen in isolation.
Without the credit crunch (which was external to the UK housing market), do you think we would currently be seeing the market falling like it is?
It would appear that way, whether it continues for an extended period or not I'm still not sure. I'm still happy that I was right more often than the doom and gloom merchants who have been predicting this every year for the last five...
A credit crunch isnt an 'external' issue .... credit markets are the blood and soul of the whole thing.
No credit = no money = no house.
Granted, there are cash buyers who dont rely on debt, but for the vast majority who make up the rest, we go begging to the banks in order to finance our overpriced pile of bricks.
Anyone buying now with the whole 'weather the storm' mentality, really should make sure they can MORE than afford to be stuck with their mortgage provider on their SVR rates, since there is NO GUARANTEE you will be able to jump to and fro onto teaser rates from other providers when your introductary rate is over.
If rates of 7-10% would be a disaster, then think twice, seriously.
The next ticking timebomb in this, will be the short to medium term effects on the economy at large, of people having to face very large hikes in their mortgage payments due to their 5% mortgages being reset and being forced onto a standard rate.
No credit = no money = no house.
Granted, there are cash buyers who dont rely on debt, but for the vast majority who make up the rest, we go begging to the banks in order to finance our overpriced pile of bricks.
Anyone buying now with the whole 'weather the storm' mentality, really should make sure they can MORE than afford to be stuck with their mortgage provider on their SVR rates, since there is NO GUARANTEE you will be able to jump to and fro onto teaser rates from other providers when your introductary rate is over.
If rates of 7-10% would be a disaster, then think twice, seriously.
The next ticking timebomb in this, will be the short to medium term effects on the economy at large, of people having to face very large hikes in their mortgage payments due to their 5% mortgages being reset and being forced onto a standard rate.
Something interesting to research, if your that way inclined, is the google video 'the money masters' which covers how governments print money, how inflation works, and how credit contraction and expansion are behind many of the 'events' of the 20th and 21st centuries.
The credit crunch was caused by dealings outside the UK housing market, ergo it's an issue external to the housing market.
That doesn't stop it being an external issue. Nothing within the UK housing market, or even credit bonds associated with it, caused the credit crunch. It's completely external to the UK housing market that the money supply dried up. The effects are clear to see, but it wasn't as a consequence of anything that happened within the UK market.
Yes, but the fact that the banks are not giving out money is not related to the UK housing market, it's an external issue. They are also not giving out money for other things.
Indeed, it's why our fixed rate mortage goes into a BoE tracker at the end of the fixed term.
The credit crunch was caused by an external issue though - the complicated packaging of US sub-prime mortgage debts. No one predicted that.
Which is why I doubt interest rates will go that high - the level of debt will not support it. The government will have to adjust its inflation target before letting rates go that high.
The banks are adjusting interest rates outside of the Bank of England rates.
At the last MPC the rates were kept on hold and yet a lot of banks increased their rates. LIBOR is where the banks got their money from and that is outwith the control of the government.
Yes, fixed rate mortgage rates are determined by the LIBOR, the SVR is determined by the BoE rate though, which is why the current fixed rate mortgage on offer from my mortgage lender is 1.5% higher than what I got, while the SVR is 0.5% lower
Fixed rates will never go above SVR rates, so as long as the SVR doesn't go too high, the economy won't implode.IMO No!
a drop of 50% is a hell of a lot. and to say that it wont improve again untill 2017
cant see that either.as ive mentioned before. people can still get very very good rates if they have 25% to put down!
IMO No!
a drop of 50% is a hell of a lot. and to say that it wont improve again untill 2017
as ive mentioned before. people can still get very very good rates if they have 25% to put down!
Are you willing to put your money where your mouth is?
Spreadfair has some bets for the UK housing market up to 2011, if you think it's not going to fall that much you could bet against it and win big if they don't drop as much as expected.
Of course you could also lose big if they drop more than expected.
http://www.spreadfair.com/
Banks have also been tweaking their tracker products though, which are (by definition) based on the BoE base rate. They've been tweaking the 'extra' they charge.
For example back in January we switched to a fees/valuation free +0.59% lifetime tracker. The closest product available from that provider today is a +1.04% lifetime tracker with a £899 application and £140 exit fee. Obviously that particular deal isn't competitive in the market these days, but it goes to show much much has changed at one institution in the space of 4-5months. The closest I've seen from any provider is the Woolwich at +0.74% fees free, and afaik they charge for valuations.
For example back in January we switched to a fees/valuation free +0.59% lifetime tracker. The closest product available from that provider today is a +1.04% lifetime tracker with a £899 application and £140 exit fee. Obviously that particular deal isn't competitive in the market these days, but it goes to show much much has changed at one institution in the space of 4-5months. The closest I've seen from any provider is the Woolwich at +0.74% fees free, and afaik they charge for valuations.
its abit more in depth than will it fall by 50% before 2011? yes or no?
ive only had a quick look to be honest so not 100% on how you bet on that.
but 50% in 4 years. i would eat my hat if that happened. I wouldnt put a minimum bet of £1000 on that though (as i dont have £1000 to my name
)The basic premise is that that you can 'buy' into the housing market at a certain price and depending on what happens you will make or lose money.
The buy price for Jun 08 is £184.5K and for Dec 10 it's £140K, so the indications there are that property will fall by 24% in those 2.5 years.
If you think it will do better you can buy at 140 and if house prices are more than £140K on average in Dec 10 you will make money.
If they go below you will lose money.
And also, that 50% drop in 4 years is 23.5% drop in nominal amounts coupled with 4 years of 3.5% inflation, which gives around a 50% drop in real values.
It's not saying that a house worth £200K today will be worth £100K in 4 years.
The calculation is (1 / ((1-0.235) / (1.035^4))) - 1, which gives ~50% falls.
The buy price for Jun 08 is £184.5K and for Dec 10 it's £140K, so the indications there are that property will fall by 24% in those 2.5 years.
If you think it will do better you can buy at 140 and if house prices are more than £140K on average in Dec 10 you will make money.
If they go below you will lose money.
And also, that 50% drop in 4 years is 23.5% drop in nominal amounts coupled with 4 years of 3.5% inflation, which gives around a 50% drop in real values.
It's not saying that a house worth £200K today will be worth £100K in 4 years.
The calculation is (1 / ((1-0.235) / (1.035^4))) - 1, which gives ~50% falls.