BBC blog - Politician says lowering prices is "politcal suicide"

StevieJ

Kohoutek wrote: »

Benjamin Graham, Warren Buffet's biggest influence, said:

I would suggest to you that using that definition a bank account would be the most promising investment (well maybe not at the moment ) but we all know that a bank account is not an an investment. Talking about speculation the risk warning on most 'investment' products is not there just to take up space.
BTW I am not sure commodity producers pay anywhere near decent dividends, except of course the oil companies and yes I am well stocked up in those.

twadge_face

nollag2006 wrote: »

Very disturbing that bears take such pleasure in seeing others lose their life savings, just so they can hold onto the vain hope that they can buy a house cheaply in the next few years.

What a frankly ridiculous and arrogant assertion.

Younger people and homebuyers who have come late to the debauched "party" just want a fair bite of the cherry, but some people have already scoffed the whole damn bunch.

Let me let you in on a secret ... it aint going to happen

Let us into a secret? What inside information do you have? What propaganda are you trying to spread? And why? And what's the motive? What have you got to lose?

Are you another 50 Cent Poster like Hamish McTwuntish?

Or just another bull up to his eyes too terrified to face the inevitable which shall come to pass?

Kohoutek

StevieJ wrote: »

I would suggest to you that using that definition a bank account would be the most promising investment (well maybe not at the moment ) but we all know that a bank account is not an an investment. Talking about speculation the risk warning on most 'investment' products is not there just to take up space.

In the technical sense of investment offered by people like Graham, a bank account is an investment - the depositor is lending capital to a bank, which pays income and the return of the principle in return. It's not the most promising, but it's the safest.

The warning on those investment products are there for legal reasons, that doesn't mean they're not investments. If you buy a house or some commodities there's no warning at all!

StevieJ wrote: »

BTW I am not sure commodity producers pay anywhere near decent dividends, except of course the oil companies and yes I am well stocked up in those.

But they're still better than buying just commodities, because the company's management adds value. If that wasn't the case then no-one would own mining stocks and everyone would just buy base metal futures instead, for example.

StevieJ

!!!!!!_face wrote: »

What a frankly ridiculous and arrogant assertion.

Younger people and homebuyers who have come late to the debauched "party" just want a fair bite of the cherry, but some people have already scoffed the whole damn bunch.

Debauched party? oh sorry you meant people buying somewhere to live when I first took out a mortgage the interest rate started at 7.5% and was soon over 15% resulting in more stress than the average FTB would find today.

StevieJ

Kohoutek wrote: »

The warning on those investment products are there for legal reasons, that doesn't mean they're not investments. If you buy a house or some commodities there's no warning at all!

I didn't say they were not investments I meant they are speculative, ask anyone who bought in July 2007 what they think.

Kohoutek

StevieJ wrote: »

I didn't say they were not investments I meant they are speculative, ask anyone who bought in July 2007 what they think.

It depends whether there's a difference between a bad investment and speculation.

twadge_face

StevieJ wrote: »

Debauched party? oh sorry you meant people buying somewhere to live when I first took out a mortgage the interest rate started at 7.5% and was soon over 15% resulting in more stress than the average FTB would find today.

Flippant comment but I'll bite because I think you're missing an important point.

If you think that is an accurate comparator then you have to remember that property price to earnings multipliers back when interest rates were at that level were something like 3-4x. It doesn't take a lot of research to see that in this messed up country some places the same multiplier can be as high as fifteen times local salary.

And you still think 7.5% > 15% would result in more stress on an FTB than today?

Reflect for a moment that at least you had breathing room. The rising prices you're seeing now are based on inordinately low volumes, massively high house prices, and 0.5% base rates (e.g. tracker of base + 1.49% = 1.99%).

When base rates go up a mere percentage point from 0.5% to 1.5% that will DOUBLE the interest being paid on those tracker mortgages.

For those poor folk who have bought post the near-ZIRP implementation they are going to be ruined. Or perhaps just stuck for a decade or so. I suppose on the bright side they'll have a roof over their head. Presuming they remain in employment, or their benefits continue. Nothing is certain right now considering the madness that Mad Gordon has wreaked.

Cor blimey, guv'nor. What's gonna happen when rates go back to a mere 5%? Still low by long-term standards. BUT, take for our example a base rate tracker, that would mean a comparative jump in interest rates of 1.99% to 6.49%. Remember, tracker of base + 1.49% would now equal 6.49%.

Hmm, compared to 7.5% going up to 15%, suddenly you don't have a metaphorical leg to stand on. Your rate doubled. Our poor homebuyer example finds their rate triples. They would have been overstretched in the first place even with the historically low rates and now they are mega-ruined.

And... the FTB's new rate is still less than what you started on (7.5%).

Finally, no I do not blame these homebuyers. They did come to the party late, but it wasn't their fault. It wasn't their choice that the party became debauched.

What you're right about is that buying somewhere to live shouldn't be like joining a debauched party. It should be a sane, sensible and sustainable engagement.

Anyway, the debauched party is just coming to a close. Like any mad party, the afterparty will make a lot more sense.

StevieJ

People who are on 1.45% rates now were almost certainly on much higher rates previously and should be using that windfall to pay down their mortgage, FTB's on the other hand have not been privy to the very low rates because of ridiculous high margins that will shrink as interest rates increase.

Hmm, compared to 7.5% going up to 15%, suddenly you don't have a metaphorical leg to stand on. Your rate doubled. Our poor homebuyer example finds their rate triples. They would have been overstretched in the first place even with the historically low rates and now they are mega-ruined.

mbga9pgf

StevieJ wrote: »

People who are on 1.45% rates now were almost certainly on much higher rates previously and should be using that windfall to pay down their mortgage, FTB's on the other hand have not been privy to the very low rates because of ridiculous high margins that will shrink as interest rates increase.

Hmm, compared to 7.5% going up to 15%, suddenly you don't have a metaphorical leg to stand on. Your rate doubled. Our poor homebuyer example finds their rate triples. They would have been overstretched in the first place even with the historically low rates and now they are mega-ruined.

So, lets get this right, the banks will shrink margins (implicit here that there is decreasing risk of default on low deposits) in a rising interest rate environment, WHY exactly?

brit1234

StevieJ wrote: »

In addition I can't agree with the buy a house live in it = no investment, buy a house rent it out = investment !!!!!! so if I buy a house and rent it out, but in addition I rent somewhere else for myself, I am an investor.

Its simple enough. Buy a property rent it out and make profit on rent its an investment.

Buy a property live in it, or rent it out without a rent profit it is not an investment.

All this capital gains focus is unsustainable bubble economics when people are distorting the market. Like said above, non maintained home typically depreciate in value otherwise they rise with inflation. To take them above inflation you need to add value.

It can't be any simpler. We are playing bubble economics caused by too low interest rates, fraud and reckless lending. If every thing is so good lets put up interest rates.