The next phase of the house price crash.

HammerSmashedFace

As regulars on here will know, I'm am a strong advocate that the current ramping of house price rises is wholey fake, when comparing it with a proper functioning market. Here we have a pretty interesting article that suggests just as I have been saying that we are merely in the eye of the storm, being protected by unsustainable policies. Enjoy.

Remember the subprime crisis? A quick recap. Banks used to make home loans using the money that savers deposited with them. The savers got one rate of interest, the borrowers paid a higher rate, the banks made a profit in the middle, and everyone was happy.
Then banks realised they could parcel up the loans and sell them to other people. So rather than having to attract savers, they wrapped up home loans and sold them to investors. Demand for these packages (mortgage-backed securities, or MBS) was so high that banks couldn't write loans fast enough.

Hence borrowing costs and standards plunged, house prices surged, lots of people got home loans who shouldn't have, and it all went pear-shaped when some particularly dodgy debtors in the US started defaulting before they'd even made a single payment.
Fine, we all know the story. But what happened next? The securitisation market dried up completely. Demand for MBS shut down everywhere. That was a problem for British lenders. Because between 1999 and 2007, according to the Council of Mortgage Lenders (CML), new mortgage lending outstripped retail deposits by £180bn. In other words, that £180bn didn't come from savers, it came from investors.

Basically you an me the taxpayer have propped up the market to the tune of £314 billion. So to sum up, all you FTB'rs out there have been paying your taxes so that you may be priced out of the market..... nice, not.

http://www.moneyweek.com/investments/property/get-ready-for-the-second-phase-of-the-house-price-crash-00602.aspx?utm_source=newsletter&utm_medium=email&utm_campaign=Money%2BMorning

chucky

This could have been a credible argument 12-18 months ago.

It falls flat on it's face once you look at what Lloyds have been doing recently setting up their RMBS deals. There obviously an appetite for RMBS otherwise the Lloyds deals wouldn't have been that popular.

The moneyweek editors are getting desperate trying to peddle the same old news to the HPC cult...

Rinoa

HammerSmashedFace wrote: »

Basically you an me the taxpayer have propped up the market to the tune of £314 billion. So to sum up, all you FTB'rs out there have been paying your taxes so that you may be priced out of the market..... nice, not.

Far from the tax payers losing out, they are charging the banks appropriate interest at commercial rates.

A nice little earner if you ask me.

And they will be only too willing to extend the arrangement and generate further profit from the banks way into the future.

Emy1501

We as the Tax payers are only supporting this because no one else will. Just like we are supporting the banks. Peston has a piece about this on his blog. If the BOE thought they could offload these mortgages onto the private sector they would.

phil_b_2

The crash has been and gone, don't you know?

Dan:_4

We have had a 20% crash, this is larger then we had in the 90s - when will people realise the 50%+ falls banded around this forum, simply will not happen?

Emy1501

Dan: wrote: »

We have had a 20% crash, this is larger then we had in the 90s - when will people realise the 50%+ falls banded around this forum, simply will not happen?

When the economy starts to show signs of growth and the banks are able to operate on their own without relying on the government. I see RBS is espected to make another 7b loss this year. By the way I don't expect prices to fall 50%.

StevieJ

Dan: wrote: »

We have had a 20% crash, this is larger then we had in the 90s - when will people realise the 50%+ falls banded around this forum, simply will not happen?

More hope than judgement.

Dan:_4

Emy1501 wrote: »

When the economy starts to show signs of growth and the banks are able to operate on their own without relying on the government. I see RBS is espected to make another 7b loss this year. By the way I don't expect prices to fall 50%.

It is only a small majority on his forum and HPC.co.uk that expect/hope prices to fall 50% - in the real world such a statement is pure comedy.

HammerSmashedFace

Dan: wrote: »

It is only a small majority on his forum and HPC.co.uk that expect/hope prices to fall 50% - in the real world such a statement is pure comedy.

Although I agree to a certain extent, we must remember that 50% down was pretty much a certainty until the government intervined and indebted the next two generations to stop it. the piggy bank is now empty, so any other crisis that raises it's head in the next decade or so would mean there is no money to bail out the over-valued housing market again.

I won't mention the subject that I often talk about on here that is likely to make itself felt within a decade, and without doubt will make the financial meltdown of 2008 seem like trouble in toytown. So don't be too sure that 50% won't happen at some point in the not too distant future.

Cleaver

HammerSmashedFace wrote: »

As regulars on here will know, I'm am a strong advocate that the current ramping of house price rises is wholey fake, when comparing it with a proper functioning market.

'Fake' is an odd word to use. I would say that this house rise is as 'real' or 'genuine' as any other rise in house prices, it's just that, in your opinion, it's been caused through artificial stimuli rather than supply / demand, desire for housing or other more traditional factors.

As an aside, it's interesting how the use of certain words are phrases are used by people who are trying to convince people that their line of thought is the correct one. I don't really see anything wrong with that, but I know some on here would call it bias, ramping, vested interest etc. etc.