Lenders warn of massive mortgage crunch

Thrugelmir

1984ReturnsForReal wrote: »

Thanks

They should be reducing the debt levels greatly though, instead of trading on as normal.

If they don't there is a danger of total banking collapse at the next recession (due in....... 8-10 years).......

Therein lies the problem. Bank debt is owed by Consumers and Corporates.

Contract credit to quickly. Economic growth falls. Double dip recession.

Interesting times ahead.

For those debt free though. Plenty of opportunities will arise. As demand for cash will be high.

Kohoutek

bernard_shaw wrote: »

Conclusion - lenders will require continuing state support after 2014.

I pray that this doesn't happen here. In the US, the government's de facto nationalisation of Fannie Mae and Fannie Mac means that it owns virtually the entire US mortgage market.

The liabilities of Fannie Mae and Fannie Mac are an amazing $6.3 trillion - nearly half of US GDP. The losses the government would incur from bad debt or a decline in house price values are astronomical. In fact, the government is so worried they deliberately omitted Fannie Mae and Fannie Mac from the recent budget.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.G6KFfaDdSc

With this and it's out of control spending on defence and social security, the US is heading towards some extremely serious fiscal problems, which could make themselves apparent within a few years or later this year. If the UK decides to de facto nationalise the mortgage market by guaranteeing it, national bankruptcy or hyperinflation caused by currency debasement is a virtual certainty. We all know house price inflation cannot go on forever in the context of higher unemployment and a weaker, more highly taxed economy. If the government imposes guarantees, it means the decline in house prices will take the whole country with it.

StevieJ

bernard_shaw wrote: »

Here's the horse's mouth:
http://www.cml.org.uk/cml/publications/newsandviews/57/199

Conclusion - lenders will require continuing state support after 2014.


Is this the Soviet Union?

Strange how the lenders credibility takes a quantum leap when it suits the bearish posters. Statements from VI = pitching for some goodies.

Thrugelmir

Kohoutek wrote: »

I pray that this doesn't happen here. In the US, the government's de facto nationalisation of Fannie Mae and Fannie Mac means that it owns virtually the entire US mortgage market.

Fannie Mae was born in the 1938 offering long term cheap fixed rate mortgages. The US Government underwrote the bond issues that was used to raise the money for the financing of mortgages. So actually there's little thats changed other than the direct ownsership in the past 70 years.

Those that could afford mortgages did, and created the US surburbia of today benefiting from low cost of money. Those that couldn't didn't helping to create the wealth divide of today.

bernard_shaw

Kohoutek wrote: »

We all know house price inflation cannot go on forever in the context of higher unemployment and a weaker, more highly taxed economy.

There are some here who make a lot of sound and fury setting their face against this self-evident truth.

bernard_shaw

StevieJ wrote: »

Strange how the lenders credibility takes a quantum leap when it suits the bearish posters. Statements from VI = pitching for some goodies.

Oh, I don't think the lenders are credible at all. Their trade body, the CML is simply acting in its members interests by bleating early and often for state support. Perfectly understandable.

Whether or not their position is credible I cannot say. What is interesting is the effect that this call for support will have on private sentiment and on public policy.

StevieJ

bernard_shaw wrote: »

There are some here who make a lot of sound and fury setting their face against this self-evident truth.

That truth was even more self evident 12 months ago, according to many on here apologies, many who used to be here.

Kohoutek

StevieJ wrote: »

That truth was even more self evident 12 months ago, according to many on here apologies, many who used to be here.

For the last 12 months, the Bank of England have bought £200 billion of gilts and other securities from banks in exchange for cash. This is intended to encourage banks to lend to business, and, guess what, the housing market.

It's also been widely reported that prices have been propped up primarily by temporary lack of supply, not sustainable demand. In the next few years, without further state support or QE, house price inflation will unravel to an extent.

StevieJ

Kohoutek wrote: »

For the last 12 months, the Bank of England have bought £200 billion of gilts and other securities from banks in exchange for cash. This is intended to encourage banks to lend to business, and, guess what, the housing market.
.

As I said, according to some posters on this board (and others) the market could go only one way in 2009 no ifs and buts.
You don't want us to drag those posts up again do you, the ones where the bullish posters mentioned state support for mortgage holders, QE and very low interest rates and the bearish posters mentioned no quarter -50 by Yuletide

Kohoutek

StevieJ wrote: »

As I said, according to some posters on this board (and others) the market could go only one way in 2009 no ifs and buts.
You don't want us to drag those posts up again do you, the ones where the bullish posters mentioned state support for mortgage holders, QE and very low interest rates and the bearish posters mentioned no quarter -50 by Yuletide

I didn't make any house price predictions last year...the bullish posters you mentioned who cited QE and very low interest rates made an obvious correct call. But that doesn't change the fact that the artificial measures that are propping up the market can't go on forever and therefore HPI cannot go on forever. If the government was responsible, then they would be discouraging potential first time buyers at all costs. A substantial correction is inevitable.