Jump to content
Sign in to follow this  
drbubb

The politics of falling UK home prices

Recommended Posts

I said 'money in peoples pockets' and was referring to the argument had elsewhere about inflation not about Harold Wilson's speech.

 

What accusations? Please use the thread where they were made to comment.

Same thing.

 

And I did use that thread (fair tax), you didn't reply.

Share this post


Link to post
Share on other sites

Are the UK public are being actively primed for higher mortgage interest rates.

 

After reading the following in the Daily Mail I think that they are.

 

Get ready for seven in 2011 - because experts say seven per cent interest rates could be a reality for thousands of borrowers this year, even if the Bank of England base rate barely changes.

 

Major lenders, including C&G, NatWest and Yorkshire Bank, are already charging almost seven per cent on some low-deposit and low-equity fixed-rate deals, while standard variable interest rates at building societies such as Newcastle and Nottingham are not far behind.

 

...

 

The best advice is to prepare for the worst now. The CBI predicts that the first rate rise in two years will come ‘earlier rather than later’ in 2011.

 

 

There's a good Alphaville post from yesterday about the current falling trend in house prices (complete with ironic title), that rubbishes the spin cacked out by Halifax.

 

There is also an interesting comment by Ando, shown below:

 

Worth noting that the "expensive" new debt remains relatively cheap(ish) by historic standards and that the last decade has been the aberration, not the norm. It is very likely that in 2-3 years the idea that a new buyer could get a mortgage under 6% will look laughable. The effect on house prices depends on what happens to the base rate in this time as increases are the only way to "bail-in" the bailed-out still benefiting from 2.5% SVRs and lifetime trackers and the like. Banks need to make more money out of existing borrowers and soon.

 

All this comes down to the fact that banks can't fund the mortgage they grant at base rate (that's why the number of mortgage has halved since 2007). Banks must fund their mortgage lending via the bond market. At the moment, it's asking circa 6%. And this level is being held low by the QE.

 

What price would UK mortgage bond debt be without QE?- 8%, 9%. What spread would the banks put on top of the bond yield to produce profits large enough to continue recapitalising; 2%, 3%, 4%?. And when will the banks have to start 'bailing in' the bailed out borrowers?

 

Share this post


Link to post
Share on other sites
There's a good Alphaville post from yesterday about the current falling trend in house prices (complete with ironic title), that rubbishes the spin cacked out by Halifax.

They got that right:

"Hmm. Interest rates likely to remain very low for some time! (?)

An increasing number of economists are starting to question that view which is no surprise when members of the Bank of England’s monetary policy committee expect consumer price index inflation to hit 4 per cent early this year."

 

Here's what is happening in the market

 

10 year UK Bonds ... update : monthly chart

xxxos.png

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×