We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
At last. A sane comment on house prices and the recent interest rate cut
carolt
Posts: 8,531 Forumite
http://www.guardian.co.uk/money/2008/dec/06/interest-rate-cut-property-prices
Let's jump for joy at ultra-low interest rates. But not if you're young and thinking of buying your first place. And certainly not if you're older and rely on savings. The rate cut and anti-repossession measures are a huge gift to people who took on large loans during the boom, and to those who can no longer afford them. But it won't do anything to promote a healthy, sensibly priced property market. And while the banks are supposed to be lending more, this move may, perversely, result in them lending less.
Banks are making huge losses from their past lending errors. To function properly, they now need to make a margin. Yet they are saddled with tracker mortgages giving them 1.5%-3% interest, while having to pay out more than that to savers. Result: misery.
Banks and building societies are in a bind. They need to attract savings, but won't because rates are so low. They need to lend to first-time buyers but can't at attractive prices when they are losing so much on trackers. Meanwhile, the number of "non-performing loans" will spiral as struggling borrowers (and some not-so-struggling) take advantage of the two-year holiday on repossessions. The result will be yet more capital erosion at the banks.
Don't imagine you'll be offered a new mortgage at 2%. Expect 4%-4.5% if you're a top quality borrower with a huge deposit. If not - almost all first-timers - don't expect less than 5%. And your credit card? That'll continue charging an APR of 14%-15%.
Annuities, which are partly priced off gilt yields (themselves related to base rate) will fall to distressing levels. Your pension savings, already hammered by a falling stockmarket, will convert into a miserably low income.
Alistair Darling says he wants to support the housing market, which is why the government pressured Halifax and Nationwide into removing the 'floors' on their trackers. Such is the weird world of finance now, I find myself sympathetic to the banks - not that they should have got into this position with insane lending practices.
If Darling wanted to support the property market, he should not have squandered £12.5bn on the VAT cut. The money should instead have been directed into a programme of social housing - one that learns both the lessons of Easterhouse and Ronan Point, and the failed buy-to-let experiment.....
Let's jump for joy at ultra-low interest rates. But not if you're young and thinking of buying your first place. And certainly not if you're older and rely on savings. The rate cut and anti-repossession measures are a huge gift to people who took on large loans during the boom, and to those who can no longer afford them. But it won't do anything to promote a healthy, sensibly priced property market. And while the banks are supposed to be lending more, this move may, perversely, result in them lending less.
Banks are making huge losses from their past lending errors. To function properly, they now need to make a margin. Yet they are saddled with tracker mortgages giving them 1.5%-3% interest, while having to pay out more than that to savers. Result: misery.
Banks and building societies are in a bind. They need to attract savings, but won't because rates are so low. They need to lend to first-time buyers but can't at attractive prices when they are losing so much on trackers. Meanwhile, the number of "non-performing loans" will spiral as struggling borrowers (and some not-so-struggling) take advantage of the two-year holiday on repossessions. The result will be yet more capital erosion at the banks.
Don't imagine you'll be offered a new mortgage at 2%. Expect 4%-4.5% if you're a top quality borrower with a huge deposit. If not - almost all first-timers - don't expect less than 5%. And your credit card? That'll continue charging an APR of 14%-15%.
Annuities, which are partly priced off gilt yields (themselves related to base rate) will fall to distressing levels. Your pension savings, already hammered by a falling stockmarket, will convert into a miserably low income.
Alistair Darling says he wants to support the housing market, which is why the government pressured Halifax and Nationwide into removing the 'floors' on their trackers. Such is the weird world of finance now, I find myself sympathetic to the banks - not that they should have got into this position with insane lending practices.
If Darling wanted to support the property market, he should not have squandered £12.5bn on the VAT cut. The money should instead have been directed into a programme of social housing - one that learns both the lessons of Easterhouse and Ronan Point, and the failed buy-to-let experiment.....
0
Comments
-
Why won't they attract savers?
If savings rates are 1% or 2% but inflation 1% (what everything appears to be working toward) I can't see why saving is not attractive? What else will people do with their excess money? Spend - well GB will be happy with that. Repay debt - I'll be happy with that. Stock market - probably not given market!0 -
Why won't they attract savers?
If savings rates are 1% or 2% but inflation 1% (what everything appears to be working toward) I can't see why saving is not attractive? What else will people do with their excess money? Spend - well GB will be happy with that. Repay debt - I'll be happy with that. Stock market - probably not given market!
High yield/low debt companies will start to look very tasty.'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
-
Thanks for that:beer:Plenty of small caps are apparently trading for a lower mkt cap than the cash they have in the bank.
Apparently RHJ Holdings is one of those (DYOR, I have no conection and no position long or short at present).
Also Utility companies with fixed price increases and captive consumers.'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
Thanks for that:beer:
Also Utility companies with fixed price increases and captive consumers.
I suspect that many of those sorts of regulated utilities are going to be excellent buys in the near future. They have been beloved of the leveraged buy-out/private equity chaps over the past few years. If the 'credit crunch' isn't resolved then there'll be plenty of distressed sellers that are unable to refinance crawling out of the woodwork soon, IMO. We live in interesting times unfortunately.
To remain on topic, here is a house. It has a price:
On Topic House Link0 -
I suspect that many of those sorts of regulated utilities are going to be excellent buys in the near future. They have been beloved of the leveraged buy-out/private equity chaps over the past few years. If the 'credit crunch' isn't resolved then there'll be plenty of distressed sellers that are unable to refinance crawling out of the woodwork soon, IMO. We live in interesting times unfortunately.
To remain on topic, here is a house. It has a price:
On Topic House Link
Is that around £280k and £78 a month Gen/Water rates. Looks like a bargain to me. Is it?'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
I suspect that many of those sorts of regulated utilities are going to be excellent buys in the near future.
I've just jumped back into Invesco/Perp High Income fund. Plenty of cash rich companies inside this fund, incl. some utilities.In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0 -
A guy at work lives cheaply with his brother and has substantial savings. I chose to have a mortgage. We cannot understand why the government is penalising him to my advantage. Not complaining, but it does seem odd, and my friend doubts he will ever bother buying a house.Been away for a while.0
-
Is that around £280k and £78 a month Gen/Water rates. Looks like a bargain to me. Is it?
No idea. I picked a house at random.
The Aussie housing market seems to be that renting is great value unless you want to live right on the Ocean on the top surfing beaches. Double the rent to be able to step out of the front door and surf rather than walking 5 mins seems to be the score from my research so far.
Repayment mortgage payments are about double rental payments in general. LLs can offset rental business losses against general income so people are happier to subsidise their tenants' rent. Of course in the UK, Aus or any other country that depends on the LL keeping his/her job and thus being able to subsidise the rent.
We're looking at the different possibles for where to live. On the short list so far are Dee Why, Five Dock, Balmain (if I get a good job) and Hornsby. I suspect the first or last are most likely at present.
Dee Why is a a fantastic beach. Considering it's in the city it's amazing. On the down side it's pretty studenty/surfy so there's probably plenty of drugs and all the annoyances that go with that also it's a bit of a rough commute.
Hornsby is a nice place. Good schools, good rail connections. 15km from the beach (nice ocean beach) and closer to a really nice spot on a fjord-like river inlet thing*. Down side is that it's still commuting. I hate commuting. But if we live there we could buy the Aussie 1/4 acre and build a lovely house on it.
Mrs Generali doesn't want to move suburbs again until the Generalissimos are grown up so we need to make the right choice.0 -
I've just jumped back into Invesco/Perp High Income fund. Plenty of cash rich companies inside this fund, incl. some utilities.
It has lost a fortune in the recent past, surely must be a solid buy now. Good luck
'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.3K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.3K Work, Benefits & Business
- 601.1K Mortgages, Homes & Bills
- 177.6K Life & Family
- 259.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards