House prices could fall another 40% from here.

michaels

Thrugelmir wrote: »

The majority of institutions don't lend or base their rates on Libor.
As its not the basis on which they secure funding.

I would be really interested to know on what basis the big banks do secure funds for svr lending - I thought Libor by definition was the cost to a triple a rated bank (are there any left?) to secure funds. I would have thought they would borrow fairly short term funds against floating rate mortgage lending so that they don't end up with a maturity and potential rate mismatch? I can see tho there there is a liquidity risk if you lend what is in effect long and borrow short.

GDB2222

kennyboy66 wrote: »

Now, I don't know if Halifax suspended publication of this index, but I do know that it took me 3 mins to find the latest one using google.


Now the Halifax index appears always to have used Male fulltime mean earnings. You can argue about the validity of this but we might as well be consistent.
The index peaked at July 2007 at 5.84, it is now (April 09) 4.26.

I'm lost here. I think the Halifax do publish this figure, and it's 4.36 in their May 09
http://www.lloydsbankinggroup.com/media/pdfs/research/HousePriceIndexMay2009.pdf

Where did you find the 4.26 figure? Linky please. Or did you calculate it, and if so what figures did you use? (Not that it's much different to the Halifax figure.)

Nationwide also produce a ratio, but only for first-time buyers. Much the same numbers as the Halifax.

Thrugelmir

michaels wrote: »

I would be really interested to know on what basis the big banks do secure funds for svr lending - I thought Libor by definition was the cost to a triple a rated bank (are there any left?) to secure funds. I would have thought they would borrow fairly short term funds against floating rate mortgage lending so that they don't end up with a maturity and potential rate mismatch? I can see tho there there is a liquidity risk if you lend what is in effect long and borrow short.

LIBOR is the set interbank lending rate. On a daily basis the banks are required to balance their books. As they will either need to borrow funds or will have funds to lend.

You are right in that Banks lend long and borrow short. The credit crash occured due to interbank and wholesale lending drying up. As rumours of RBS's problems hit the markets. Foreign deposiotors in RBS's overseas operations were pulling money out. Compounding the problem.

Banks lend on SVR against floating rate money, ie short term deposits. That's why instant access accounts offer such low rates. Fixed term mortgages are back to backed with fixed term deposits, or bonds.

The banks can borrow overnight from the BOE at base to balance their books. Thats why SVR's until more recently were always around 2% above base. The reason they've edged higher is the levy now are paying the FSA for deposit protection ( eg the money paid out for collapsed Icelandic banks). So maybe for the foreseeable future we'll see a higher SVR above base than the historic norm. Not putting aside the fact that the banks will need to make more profit to cover the envitable bad debts that are yet to materialise.

QE is necessary as the amount of money lent out , which has been securitised and relent over and over. Means that there is liquidity shortage in the market. The banks need to shrink their loan exposure in order reduce the deposits they need to raise to balance their books.

RDB

I like this ilistration

Yet now, many still want to rush back into the burning building just because a temporary change in wind direction has blown the smoke away to one side.

Generali

Thrugelmir wrote: »

I've held shares in my pension scheme for years. Not a fad. Until GB abolished dividend tax reclaims was even better. Never bought a single dot com share. As couldn't work out where the profit was going to be made. A considerable number of professional investment managers were bailing out of the "mortgage banks" well before the peak.

Never bothered with trackers. Buy for the long term. Cash generating well managed businessess. Don't churn as too expensive.

Yes got financial sector. Held HSBC and Standard Chartered for years. Llloyds was ok prior to HBOS merger. Though longer term a good bet once they rationationlise the 2 operations into 1.

My only investment objective was to grow at inflation plus 5% per annum. As its compounding that ultimately produces investment returns, ie reinvested income.

All very boring nothing exciting. But there again I've worked in finance for over 30 years. So little I've never experienced in one form or another.

Ignore the tax benefits of a pension at your peril. Don't have to invest in shares.

You are Warren Buffet and I claim my five pounds.

Thrugelmir

Generali wrote: »

You are Warren Buffet and I claim my five pounds.

If only. :beer:

Took it from my father....... only invest in what you can understand...... profit, cash and dividends.

Had loads of sayings like "Don't bet at the bookies own the bookies!"

Generali

Thrugelmir wrote: »

If only. :beer:

Took it from my father....... only invest in what you can understand...... profit, cash and dividends.

Had loads of sayings like "Don't bet at the bookies own the bookies!"

It is pretty much what Wozza says about investing. Do you read the Berkshire Hathaway newsletter? Very interesting and more entertaining than you'd think.

A mate of mine meets him annually as one of the company's top income generators. A very focused man.

Thrugelmir

Generali wrote: »

It is pretty much what Wozza says about investing. Do you read the Berkshire Hathaway newsletter? Very interesting and more entertaining than you'd think.

A mate of mine meets him annually as one of the company's top income generators. A very focused man.

Yes I do. Great read.

My Dad (when alive) was Finance director and Company secretary for a quoted London based Rubber Plantation Company that operated in Malaysia. Ah...the days of British Colonalisim. I used to love going up to their offices in the City. The back pages of the pink paper fascinated me from an early age. What did all those numbers mean?

He nearly throttled me when i nearly became a trainee betting shop manager. Pre computer days, all fractions and mental maths.... Great training for later in life.

kennyboy66_2

GDB2222 wrote: »

I'm lost here. I think the Halifax do publish this figure, and it's 4.36 in their May 09
http://www.lloydsbankinggroup.com/media/pdfs/research/HousePriceIndexMay2009.pdf

Where did you find the 4.26 figure? Linky please. Or did you calculate it, and if so what figures did you use? (Not that it's much different to the Halifax figure.)

Nationwide also produce a ratio, but only for first-time buyers. Much the same numbers as the Halifax.

http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp

Historical house price date link

4.26 in April (as I said)
4.36 in May (as you said)

GDB2222

kennyboy66 wrote: »

http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp

Historical house price date link

4.26 in April (as I said)
4.36 in May (as you said)

Fine, so we are looking at the same figures then. It seems strange that the writer of the article this thread is about claimed that Halifax stopped publishing the figures, when they clearly still do. It rather destroys his credibility, doesn't it?

It's also strange that he calculates a figure of 5.16 and HBOS calculate 4.36. Clearly, there is a difference in the way this is calculated.

Even so, a ratio of 4.36 is definitely above average. So, people buying now are paying over the odds. It's difficult to know what the average really is. 4.0 is quoted, but that includes the recent bubble. The long-term average excluding that is around 3.5. Either way, the ratio needs to dip below the average some of the time, or else it wouldn't be the average. However, a 40% drop (as the author claimed) would make the ratio 2.6, or even lower if there is some wage inflation.