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...again.
...again.
Crosshair VIII Hero (WIFI), 3900x, 32GB DDR4, Many SSDs, EVGA FTW3 3090, Ethoo 719
The banking industry is presently playing a game of 'pass the parcel'. When the music stops, someone, somewhere is going to find out that their parcel just contains worthless paper (i.e. US sub-prime loans that won't ever be repaid). The fear of this, as nobody knows exactly where the worthless junk is, has caused the 'credit crunch' as worldwide, short-term interbank loans expire and nobody wants to re-lend against paper-backed securities that may be worthless.
Northern Rock does not, apparently, hold this type of security and is, by all accounts, a sound business which acted prudently when they started to be affected by the slowdown of the credit market. The run seems based entirely on fear and ignorance. The irony is, there are probably other UK financial institutions who do hold significant amounts of junk securities, but their problems haven't surfaced - yet. Bad luck if it turns out to be your pension provider...Time will tell...
Most likely result of this, IMO, is that interest rates will continue to creep up - but the housing market has enormous inertia - prices will probably stagnate for a few years but are unlikely to drop significantly unless there is a recession and unemployment starts to rise. Remember, the average interest rate over the last 25 years is 8%, so rates are still well below average, and demand for houses still exceeds supply. I do think that doing your best to reduce any personal debt as soon as possible would be a shrewd move though - the 'cheap loans' party is over.
NR shares rose 6% and Alliance & Leicester's have gone up 25% after falling a third. Someone has made a lot of money. I think this scare is probably a good thing. It's the morning after a serious session of drinking cheap money. I suspect the banks and lenders are lying in bed saying never again or I won't be doing that again for a while. I would think that there will be a period of examination and reflection coinciding with a more prudent attitude towards lending. This is certainly going to affect the housing market and interests will continue to rise. The Torygraph are serialising Alan Greenspan's new book along with a few interviews and he seems to think that there are hard times ahead for UK housing market. http://www.telegraph.co.uk/money/mai...ngrspan117.xml
I saw a bit of snoozenight last night and Norman Lamont was talking about this crisis and he was saying that decreasing interest rates too fast especially after a recession only causes more grief in the long run. The chickens are coming home to roost for El Gordo as people realise that the "iron chancellor" was none of the sort and is implicitly connected with the cheap money supply that has allowed the UK to propser over the last 10 years on the back of a very sound economy built by the Conservatives who learnt their lesson after 1992 and the ERM debacle.
"Reality is what it is, not what you want it to be." Frank Zappa. ----------- "The invisible and the non-existent look very much alike." Huang Po.----------- "A drowsy line of wasted time bathes my open mind", - Ride.
poor old Rave.....he does mean to help..that's why he posts it
I shal not rip the arse anymore
Originally Posted by Advice Trinity by Knoxville
well i went and bought a couple of hundred quid worth of NRK.
shall see what happens to it in the next couple of weeks.
Ah yes. No work tomorrow, bottle of wine inside me, finally I have time to construct a long, confusingly structured post full of multiple quotes
Yep, that's the big one. Interest rates historically average 8%. They went up to 12% in 1992 (and very briefly to 15%). Anyone who thinks that the current interest rates are high needs a reality check.
No no no- BTL 'investors' have outnumbered FTBs in terms of the number of properties bought for quite some time now. There's an absolute glut of rental properties available- you only need to drive past your local development of 'luxury apartments', and take note of the number of 'To Let' boards outside to see this.If you bought a 2nd property to lease out. Your problems only start if you've not a got tenant and, according to Rave's model, seeing as everyone should sell there'll be a load of renters and bugger all space to rent... so you could clean up here and charge a premium!
A year ago, when we decided to move, we made life difficult for ourselves by giving notice on our old 1-bed flat without finding somewhere to move to. That put the pressure on a bit- and we did view 10-12 utter dives before we found our current place. When we did though, we had no bother knocking more than 5% off the asking- and what we now pay in rent wouldn't even cover the interest on the mortgage we'd have needed to buy this house.
As far as I can tell, our landlord bought it a while ago, so he's not subsidising us to live here, and hence we're not likely to be forced out because he needs to sell. So yes, we're paying his mortgage off- but since we could not have afforded to buy a house like this, the point is moot. Our landlord could have made more money than he makes from us in rent by flogging the house to a greater fool and putting the proceeds in a high interest savings account. I'm glad he didn't
No, negative equity in your house only matters if none of your other circumstances change. It seems to be generally accepted now that a crash in house prices will cause a recession (or vice-versa, though I personally see the HPC coming first). Let's say there's a recession, and you lose your job (or your partner loses theirs, if the mortage is in both your names). Suddenly, you can't afford your 25 year repayment mortgage, so to get some temporary relief you look to remortgage on Interest Only terms. Whoops! The equity in your house is worth less than the amount you need to borrow to repay your current mortgage. Mortgages are secured lending- and lenders will only lend up to the current value of the security.BUT if you're settled, happy where you are and not over-extended on your repayments, then stay where you are because Rave's doom n gloom predictions miss out on one important point:
Negative equity in house prices only matter when you want to sell your house.
So- you're basically stuffed. Really in that situation the only option would be to hand back the keys to the bank and go and hide, unless you have wealthy relatives to bail you out.
This happened all the time in the early 90s- only 15 years ago, and yet it seems to have been wiped from the nation's collective memory.
If you can. Lots of people will not be able to. Out of interest, how many people here have significant savings put away for a rainy day?Sure, it may be a pain in the arse that you're paying over the going price for your house but what's the alternative? Sell the house and take out an unsecured loan to make up the difference between what you owe and what you sold for?
Absolutely the best thing you can do is stay put and ride it out.
Mervyn King has repeatedly and explicitly stated that the BoE's job is to try and insure that inflation stays close to the government's 2% target, AND NOTHING ELSE. He said (over a year ago now, I think), and I quote: "House prices are a matter of opinion, whereas debt is real".Given the total disaster of the price crash of some 18 years ago, you can bet that the BoE will do everything they can to avoid it. And all major lenders do not want to be stuck with a load of houses to flog in auction as people hand back the keys and walk away... the lenders lost millions too so they'll work hard to keep borrowers in their properties.
The thing is, he's had to target a measure of inflation (the CPI) that is heavily weighted in favour of imported goods like electronics and Ikea furniture, but which more or less totally ignores some of the major costs of living, like, well, a roof over one's head. He knows as much as anyone (I suspect) that house prices are absurd, and unsustainable; and as much as is possible, given that he's a government employee and has to be seen to be apolitical, he's been warning of that fact.
This whole problem has arisen because Britain, as a whole, has been on an absurd borrowing binge. We now owe, as a country, something like £1.3tn- more than our annual GDP. If the BoE were to respond to this crisis by lowering interest rates, it'd be like trying to fight a fire with an extinguisher full of petrol. Debt, by implication, has to be repaid sometime. One day you will have to pay the piper. I reckon he's knocking on the door now, with a CCJ in his hand, and a 20st bailiff to back him up. He's already taken half our kids- they're off getting drunk and smoking skunk on a school night, aged 15, because they're smart enough to realise that the life that's been mapped out for them, I.E. working like dogs until they're 68 on the minimum wage, with no hope of ever owning their own homes or enjoying the quality of life that their parents had, is a total con.
Dear Zak....your faith in me is touchingpoor old Rave.....he does mean to help..that's why he posts it. It's misplaced though. Yes, I pop in a few sensible suggestions here and there because I'm very attached to Hexus and I wish well to everyone who has the sense to post here (and the sense to listen to me
). My real motivation, nowadays, is rage and a burning sense of injustice.
I'm 28. By the time my parents were my age they had a baby (er...me), and their first house, which they'd paid a reasonable amount for. Admittedly I flunked out of university and bummed about in rubbish jobs for a few years, but nowadays I have a job which pays me something fairly close to the median wage for London (because of all the overtime I work). I couldn't even afford to buy the one bedroom flat we moved out of a year ago, let alone the 2-3 bed house I'd like to own before my wife and I start a family.
I know that this is a temporary bubble and it'll burst- that's why I post here with the absolute conviction that house prices will fall. Every other masive bubble in history has burst, and so will this one. In the meantime though, I'm still slaving away with sod all to show for it, while people just a few years older than me who were lucky enough to ride the property wave MEW like crazy to swan around in X5s and 911s; and people my age borrow like crazy to lead a 'bling' lifestyle- and look down their noses at those of us with a sensible attitude to borrowing. I've been cut up by pink-shirted estate agent ******s in Audi A3s, or barged out of the way at the bar by designer label wearing, coked up dickheads, too many times now. A nice recession is just what we need to restore a decent balance to society- and I'm greatly looking forward to it.
Of course, one lone, drunken, bus-driving (not at the same time, I hasten to add) crank isn't going to bring on a recession all by himself. It's coming anyway- which is why I'm warning you all about it now, so you can take action, or not.
So really it's just jealousy for those who happened to have worked bloody hard and had a deposit at the right time?My real motivation, nowadays, is rage and a burning sense of injustice.
I'm 28. By the time my parents were my age they had a baby (er...me), and their first house, which they'd paid a reasonable amount for. Admittedly I flunked out of university and bummed about in rubbish jobs for a few years, but nowadays I have a job which pays me something fairly close to the median wage for London (because of all the overtime I work). I couldn't even afford to buy the one bedroom flat we moved out of a year ago, let alone the 2-3 bed house I'd like to own before my wife and I start a family.
I know that this is a temporary bubble and it'll burst- that's why I post here with the absolute conviction that house prices will fall. Every other masive bubble in history has burst, and so will this one. In the meantime though, I'm still slaving away with sod all to show for it, while people just a few years older than me who were lucky enough to ride the property wave MEW like crazy to swan around in X5s and 911s; and people my age borrow like crazy to lead a 'bling' lifestyle- and look down their noses at those of us with a sensible attitude to borrowing. I've been cut up by pink-shirted estate agent ******s in Audi A3s, or barged out of the way at the bar by designer label wearing, coked up dickheads, too many times now. A nice recession is just what we need to restore a decent balance to society- and I'm greatly looking forward to it
Of course, one lone, drunken, bus-driving (not at the same time, I hasten to add) crank isn't going to bring on a recession all by himself. It's coming anyway- which is why I'm warning you all about it now, so you can take action, or not.
What you're REALLY saying is that you hope that me, who's worked hard all his life, and I mean seriously hard with stupidly immense hours cheffing...
Me, who has scrimped and saved for everything I have... yes, I've borrowed on credit cards now and then but I don't have the runaway debt of some people... Are you saying that I don't deserve what I've worked for because you can't afford it?
Seems to me what you're ACTUALLY saying is that because YOU haven't got a house you hope a recession bites ME in the ass and takes away all I've got, all because I just happened to have saved the money and was able to get on the market when it was dead.
Maybe I'm reading too much into this.
Very likely that I'm over emphasising your points to make mine but it does seem to me that whilst you're practically begging for a price crash and recession,because it'd suit you, you seem to be forgetting that millions of people like me, with kids to support, could end up in a mortgage pit... but who gives a stuff that I'm handing my keys back and moving into my mum's house as long as you can now afford a house, eh?
Yes mate, the house price rise is bloody stupid but praying for a price crash a recession is daft. What we NEED is cheap affordable housing. Christ, there's literally MILLIONS of unoccupied homes all over the country, crying out for a bit of renovation and then they could be flogged to first time buyers. The problem is, with what a first time buyer can afford, there's just no profit in it...
Yes Nick you are correct. A recession and price crash is going to benefit no one except for the selfish few hoping to make a quick buck . Looks like the end for NR as it exists. Just shows how a viable company with plenty of 'assets' can be destroyed by panic, all fuelled by the media. The share price is down to 194 now and I think it will not be long before someone steps in with a 'bid' . Time to buy guys or maybe wait for a further drop in share price. Nip in there RAVE and make youself a ' killing ' before the takeover.
There need not be a loser. All we need is a sensible readjustment and then the only people who will loose out are those who have over invested in properties. People who currently live in the house they own will not lose out if house prices fall in a non-crashy way, as long as they didn't take on more than they could afford in the first place - if they did, then even rising house prices don't help unless they sell and start renting again.
Rising house prices - winners: investors, estate agents, down-sizers. Loosers: First time buyers, up-sizers.
Falling house prices - winners: First time buyers, up-sizers. Loosers: Investors, empty BTR.
Steady house prices - winners: Current owners, first time buyers, estate agents. Loosers: no-one really.
Last edited by kalniel; 20-09-2007 at 09:58 AM.
The impact is way wider than just house prices. The sky really could be falling.
Saudis may drop their peg to the Dollar
This could well mean a dollar in free fall. If Saudi goes the Gulf will follow (except Iraq, which is an occupied country) and this will chime well with the creation of the Gulfo(™) which is the new single currency planned for the GCC countries. Next step would be to start selling oil in Gulfos.
The only choice America would have if the Saudis did pull out of the dollar would be to raise interest rates in order to attract someone with $3,500bn to spare who would bail them out; and that won't be the Chinese. If Dollar interest rates rise, so will Euro and Pound rates and we will be looking at some serious **** happening.
(Thanks Evilmunky)
Eagles may soar, but weasels never get sucked into jet intakes.
Having re-read my post, I realise that I may have appeared to be a bit harsh on old Rave... he's a nice bloke and very, very funny when drunk.
However, my next question might seem off-ish but here you go: what am I supposed to do about it?
I mean, what would you have me do, Rave?
Should I sell up and move into rented accommodation?
That's not really feasible because besides the fact I've only recently moved and it's a major pain moving, it'd cost me a small fortune.
Sure, I'd release around £70k in equity but what then? Rental prices for me are so close to what I pay for a 60% mortgage, I might as well stay put.
But, playing devil's advocate to my own argument... if my mortgage was around 90% of the current value of my property, then maybe there's something to moving into rented. Either way, it'll cost anyone around £5-6k to move once you take into account removal costs, estate agent fees, solicitor's fees etc.
Taking my property as a model, with about £70K in equity, that £5k is a sizeable chunk of what we'd free up and THEN we'd be off the property ladder.
So I think my somewhat volatile response was fuelled by the fact that a) there's nothing I can do about it and b) I'd be reluctant to go into renting just for the sake of avoiding a price drop and then buying a bargain once the market has bottomed.
Don't forget, even if you're renting, someone OWNS that property and if they're getting hurt by falling prices and rising interest rates, YOU could find yourself having to move as your landlord sells up to liquidate his assets...
Yes and that's a bugger. I just got "secton 21'd" (because they just have to say they'll move back in themselves before selling..)
Now there's a good bit of Capital Gains Tax planning. Someone's been talking to their Tax Adviser!
(sorry to hear you're being forced to move, though...)
Wooo, someones bringing inteligant analysis into this thread
People really don't realise quite how much the Saudi's run the world, because like all true masters, they are pulling at the strings of the puppet. $80 a fricken barrel people? What do you do with that kind of money, how can you possibly invest all of that, there just aren't *that* many novel buildings on can put up in Dubai.
You Loan it. A large proportion of the money behind the recent credit splurge has been oil originated. Exact figures, well i've yet to see any that agree, but if you look at the availability of credit, and the oil price rises of late it makes sense there is some correlation.
As such i don't belive the availability of credit in England will disapear just yet, because there simply is too much money to invest (hence the very low intrest rates seen globally in first teir nations for some time). Where can all this money go? (and don't you dare say china.)
Rave, whilst knowing my political orientations has to agree that these things always come down to the haves and the have nots, the irony been majority of the haves would be nots if they had to afford the prices seen now. Think the average (median) household income in Mayfair is only an extra £25k than in barnet. Yet i wouldn't get much in Mayfair (despite my flat mate and i's joint income been enough). Most of the people there don't have mortgages. Hell the figures are screwie because a sizeable chunk don't have a household income.
The problem with london is the green belt. I couldn't commute as far as tiggs does everyday, i lack the ability to get up in the morning (Milton Keynes to london) yet as such i will be forever damned to a smaller property. There majority of people in london without kids don't want to commute, if you and partner/housemate both work in london, the cost saving is not as great. As such the only thing that will bring a major house price fall in london is a recession for the simple reason the vast majority of London property is at a prime LTV, thats to say from memory i think the average for residental property (this gets confusing with commercial lets, but this includes anything let for residentual purposes) is about 75-70%, this would take a hudge rate hike to cause a major crash. As above its unlikely this is going to happen, as there is too much money been invested to get rates to the lunancy of 10% (i think/belive/cling to the hope) .
What is however possible is a slight adjustment, some natural brownian motion type swing as house prices stay overall flat. This is what i would like to happen myself, as it dosen't cost me anything (or get me anything) but it does make for a better life.
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Ah so infact, everyone's been worrying about who actually paid for all this bad debt that's being defaulted on, when we needn't worry because it's actually the oil producers, thus ultimately people guzzling up stuff in cars are paying for bad loans. Horay!
This is great for me. I'm a student on a 4 year course, hoping to take a masters. The interest rate on my loan already doubled this year, and it's looking increasinglylike I'm going to be leaving uni straight into a recession, with an arseload of debt factored in. My only hope is that the games industry remains as bouyant as it is at the moment (I'm studying computer games technology which is learning code/3d modelling/AI, so it's actually useful skills). Otherwise I'm truly fracked.
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