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But a price crash hurts current owners, which isn't nice.
Only if you sell & then most would be buying again at a deflated price anyway
I guess I'm lucky in that I've paid my mortgage off & house prices are really irrelevant.
or how about you shouldnt have borrowed at such a ridculously large factor of your income,ie a house you couldnt really afford, in the 1st place
What if you didn't, and your income then falls? Not everyone who gets repoed is an idiot with a massive mortgage.
Depends on how you define "money" Pretty little bits of paper with numbers on them or the wealth to actually back them up. the bits of paper are IOUs ("The bank of England promises to pay the bearer on demand.." The governament/BofE is printing IOUs it doesbn't have the wealth to support.
And the Bank of England are effectively the fiscal arm of the government. The Bank couldn't have printed the extra notes without being told to do so.
Yeah a property crash and the associated interest rise
I'm not an economist, so humour me. Why would falling house prices inevitably result in an interest rate rise (given recent falls have resulted in decreases in interest rates!)?
As uplink says, if you think that falling house prices are a problem for all property owners then you've been taken in by the hype which was one of the factors for the whole mess we're in.
I love a good cheery thread 🙄
Thanks, i was feeling quite positive till i read this one 😉
aracer - when houses are reposessed the banks lose money. And if prices are crashing, the bank can only sell at a pretty small fraction of what they lent out. The BoE base rate might not rise but the banks' real rates will, since they need to recoup money.
Property prices are set by the market
Some might say set by greedy estate agents.
I've seen property taken off the market before Christmas only to come back on after Christmas upto 20% higher. And if you do some research on historical house prices on that particular road with comparable houses - it just isn't warranted.
Now somebody stupid and desperate enough may buy it - but that still doesn't justify the price. I'd like to think the market has learned from past mistakes but excessive borrowing for unrealistically priced property is all a recipe for disaster.
And with Greece, Spain, Portugal, Italy and Ireland all being in a deep economic mess who knows what is around the next corner?
BBSB - the little bits of paper are irrelevant, since no-one's literally printing them anyway.
[url= http://en.wikipedia.org/wiki/Quantitative_easing ]Quantitative easing[/url]
Quantitative easing is sometimes described as 'printing money', although the central bank actually creates it electronically 'out of nothing' by [b]increasing the credit in its own bank account[/b]
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and what if it isn't. we live in a benign environment with little risk from earthquake, fire, flood, famine.
as long as i'm healthy then its not really to much bother if I cant buy a few trinkets to make life a little more fun.
We could be in Haiti with a limb roughly hacked off and all our close friends and family dead.
This is going to sound mad, but to some degree their position is enviable. Once you're at the bottom (an unpleasant and sad ride) you can only go up, everyone else there is at the same level and everyone helps each other out to make the place habitable. It's a fairly positive place to be if you can see past the initial suffering. Sort of the opposite here.
Yeah a property crash and the associated interest rise
A property crash would actually put pressure on keeping interest rates low.
An interest rate rise happened when the inter-bank's cost of lending / borrowing goes up (LIBOR?). And as you know this happened with all the toxic debt floating about. And if countries in the Euro zone start going pear-shaped (as per Greece) - it's going cost more money to borrow.
If Osbourne gets his hands on the economy we will deffo have a further recession. Cutting expenditure as we are trying to get back to some level of growth would be a total disaster.
Some might say set by greedy estate agents.
It's not the estate agents buying houses - if they set the price too high they won't do any trade (as has been happening recently).
The BoE base rate might not rise but the banks' real rates will, since they need to recoup money.
Well yes, but even the banks' rates with risk factored in are at historically low levels - there's quite a lot of room for them to add in extra risk margin without the rates becoming such that anybody with any sense should have a problem (ie still lower than the rates people were paying last century).
Cutting expenditure as we are trying to get back to some level of growth would be a total disaster.
Says one lot of economists, whilst another lot says something totally different.
The trouble is, we're really deep in it this time, and if something isn't doen to start balancing the books, external factors rather than internal ones could start causing us problems due to decreasing confidence in us as a country.
We could be in Haiti with a limb roughly hacked off and all our close friends and family dead.This is going to sound mad, but to some degree their position is enviable. Once you're at the bottom (an unpleasant and sad ride) you can only go up, everyone else there is at the same level and everyone helps each other out to make the place habitable. It's a fairly positive place to be if you can see past the initial suffering. Sort of the opposite here.
Bloody hell, I hope nobody from Haiti reads that, they would feel seriously patronised
The first one aint over yet, there is a solution, keep printing money (quantitive easing) until everyone has enough and the national debt is paid off.
Cutting expenditure as we are trying to get back to some level of growth would be a total disaster.
Well the alternative is to either keep borrow more and more - or raise taxes both of which have their own problems. If I was in opposition I'd be hoping my party didn't win this time around...same as back in '92; whoever gets in next time is gonna be hated.
Some would say we need high inflation to inflate the debt down to a manageable level - that'll lead to nice high interest rates so you might want to fix now....
as long as i'm healthy then its not really to much bother if I cant buy a few trinkets to make life a little more fun.
There's trinkets, and there's paying your rent/mortgage and bills.
Some would say we need high inflation to inflate the debt down to a manageable level -
A lot of the debt has been generated by bailing out the banks, buying shares etc. As the economy improves, this debt will dissipate and the sale of shares might even make a profit. Osbourne on the otherhand seems to want to stifle recovery, and flog off the shares at a discount, we lose two ways there.
The level of UK debt is not actually that high anyway when compared to other countries.
Kimbers, my remaining mortgage is ~1.5X our combined salaries, so we most certainly have not borrowed irresponsibly.
Maybe if you had made some better decisions, tried a bit harder and weren't so difficult to get on with you'd be able to afford a studio flat in Peckham.
Quantitative easing is sometimes described as 'printing money', although the central bank actually creates it electronically 'out of nothing' by increasing the credit in its own bank account
Yes, inventing money with nothing to back it up.
Whether that's printing money or just saying it's there is the irrelevant part, the fact is that there is a claim to wealth that does not exist. And that's what got us into this hole in the first place.
Jeez, you really do need things explained, don't you?
Yes, inventing money with nothing to back it up.
But money never has anything to back it up... does it? It's just numbers on a computer!
Good old financial innovation
Maybe if you had made some better decisions, tried a bit harder and weren't so difficult to get on with you'd be able to afford a studio flat in Peckham.
I do enjoy the level of condescension on STW some days. Other days it drives me mad
[url= http://en.wikipedia.org/wiki/Gold_reserve ]ever heard of gold reserves?[/url]
The ones that labour sold for pittance?
According to that wikipedia page, we only have £10bn of gold. There must be a lot more sterling in the world than that.
So a lot of money out there has no gold to back it up, doesn't it? Is that wrong?
the model of capitalism is working
Unfortunately our brand of capitalism relies on infinite economic growth. Banks lend money then demand payment with interest. Interest payments can only come out of growth.
See the problem?
Our economic system relies on infinite growth. But we live on a planet with finite resources.
Which is a problem as we are currently running out of oil, fish, hard woods and fresh water, to name just a few things.
This guy has my favourite take on our current situation:
[url= http://www.richardheinberg.com/Home.html ]Richard Heinberg[/url]
But in terms of explaining why "modern life is rubbish", this guy is a more entertaining read:
[url= http://www.kunstler.com/index.php ]James Howard Kunstler[/url]
Kimbers, my remaining mortgage is ~1.5X our combined salaries, so we most certainly have not borrowed irresponsibly.
Maybe if you had made some better decisions, tried a bit harder and weren't so difficult to get on with you'd be able to afford a studio flat in Peckham.
im perfectly likable
if your salary is only 1.5x your remaining mortgage then you will be fine, whats the problem?
and fyi! my missus and i now have a very hefty deposit am well in a position to buy a studio flat in peckham ,we just didnt see that buying when prices were silly expensive was the right decision .......looks like we were right
as for the gold reserves labour sold off 400tonnes- we have 300 left-at a loss (compared to todays prices) of 2bn
it wasnt a smart thing to do but against a national debt of 850bn its the least of the governments failings
The level of UK debt is not actually that high anyway when compared to other countries.
"PIIGS" Debt as % of GDP (2010 forecast)
Portugal - 84.6%
Italy - 116.9%
Ireland - 82.9%
Greece - 125%
Spain - 66.3%
Compared to UK?
UK - 80.3% of GDP
The difference? Lower unemployment and not being in the Euro perhaps?
And Alistair Darling has announced a massive amount of spending, erm, I wonder where all this money is going to come from.....
http404 i thought we were at 60% of GDP
USA is at 71% japan at 200%!!
http://www.economicshelp.org/blog/uk-economy/uk-national-debt/
edit oh i see thats the forecast for 2010
So if we all work really, really hard for 10 months of the year, don't pay ourselves or each other but just our overseas creditors, we'll be sorted by xmas!
Come on, who's up for it? I will if errr....you will...honest
[url= http://www.theonion.com/content/news/u_s_economy_grinds_to_halt_as ]its all just a load of meaningless numbers[/url]
The high house prices in the UK are a poison to this nation. The problem is Labour have made everybody feel rich because their house value has risen at stupidly high rates for a number of years. Any politician who has the balls to take action that would result in a house price crash would be very brave, but ultimately that is what this country needs.
I don't want to see anybody lose their home, but in the same sense, I don't want to see anybody slave away to buy an overpriced cr@ppy flat/starter home for a massive proportion of their wages, because they are scared that 'if they don't do it now they never will be able to afford to do it'.
If car/food/energy/bike/whatever prices rise, this is seen as a bad thing. Yet people in this country see price rises in the biggest single purchase they will over make as a positive thing. Crazy.
Bring on the house price crash I say.
Rant over 😀
Christ, is it that bad? I better go and get my 99p bike oil from Wilko's then before it all goes to rat shit.
Bloody hell, I hope nobody from Haiti reads that, they would feel seriously patronised
Not patronising at all unless you have a different definition to me (patronising is to treat condescendingly, which I wasn't at all), it's just a positive outlook on a negative thing.
And to the poster above who suggested that price crashes only affect those who borrowed more than they could afford - not at all, it affects those who borrowed 200K but whos house is now worth 100K, but who are still paying for the 200K house anyway. Regardless of whether they can afford to or not.
I'm clinging to the hope that the situation has been greatly exaggerated by the media looking for the next bandwagon....like the millenium bug, swine flu, arctic chaos....but it seems pretty serious 😥
Do any of you reckon that your job is 100% safe?
ffs has any one got a rope or a razor blade,it's like reading the daily mail
not at all, it affects those who borrowed 200K but whos house is now worth 100K, but who are still paying for the 200K house anyway. Regardless of whether they can afford to or not.
...but when they paid 200K for the house they thought it was worth paying 200K for. They still have the house, all that has changed is other people's opinion of what the house is worth.
I'm also pretty certain that for some time now (since the housing crash of the 80s) its been pretty clear that house prices can go down as well as up.
...but when they paid 200K for the house they thought it was worth paying 200K for. They still have the house, all that has changed is other people's opinion of what the house is worth.
Correct, meaning they are now stuck with that house, instead of being able to move/sell etc
Do any of you reckon that your job is 100% safe?
No job is 100% secure. But to add some sunshine to the black clouds on the thread, my company has grown by approximately 10% pa for the last few years, and the workload appears to be accelerating.
We bought our house in 2007. And we plan on living in it for the next 10-20 years. The issue seems to have been the shift in viewing houses as homes to seeing them as chiefly commodities / money making ventures.
On a recession related note - does anyone want a job? (in all seriousness - we've been looking for a decent grad level support / developer. London, IT, finance, good prospects etc). You'd have thought it'd be easy to fill a vacancy. Has been a complete nightmare...
Correct, meaning they are now stuck with that house, instead of being able to move/sell etc
Then to qoute from earlier, they should get a better job or move somewhere smaller.
or perhaps they bought into the collective madness surrounding housing prices that had more in common with pyramid schemes than sensible economics.