FSA: 50% house price falls were a reasonable scenario

chucknorris

Exocet wrote: »

Oh go on then, I'll argue a little bit more. If you design a stress test for a bank, and they fail the stress test would that have an impact in their share price, perhaps even the wider financial sector? Therefore would you be inclined to make the stress test 'reasonable' rather than 'extreme' in order to avoid upsetting things?

Please don't do a really/graham on me, I haven't had tea yet.

When I bought my first investment property I kept increasing the interest rate in my spreadsheet to the point where I could not afford to live. That turned out to be over 20% (it's not as high as it sounds because at the time my mortgage rate was about 12%). But because the point of failure was well outside the anticipated market, it was good news not bad. So demonstrating the faliure point of a bank is not necessarily bad news, as long as it shows good resistance.

StevieJ

torontoboy45 wrote: »

in ireland: a fall of 30% in dublin, 25% elsewhere (based on may figures) with further falls feared.

a lot of unhappy people over there, I can tell you.

but it couldn't happen here, now could it....

Irish people were telling me in 2000 that prices were ridiculous and that people were having to move further and further out of Dublin to buy a property, I don't think they had actually had one of these booms and bust, even I could see what was coming their way.

Exocet

I'm back. Just Googled (I know, I know) Bank Stress Tests and page after page of stuff I don't understand or care about. But in one place I found this... "Critics says it's as if your doctor tried to gauge the health of your heart by setting a treadmill to a leisurely stroll".. so there is room for interpretation about how 'stressful' the stress test is.

So back to Brits opening post - about reasonable scenarios. And whether 50% is reasonable, or extremely stressful. Well, I freely admit, I just don't know.

At least inflation isn't mentioned anywhere.

chucknorris

Exocet wrote: »

I'm back. Just Googled (I know, I know) Bank Stress Tests and page after page of stuff I don't understand or care about. But in one place I found this... "Critics says it's as if your doctor tried to gauge the health of your heart by setting a treadmill to a leisurely stroll".. so there is room for interpretation about how 'stressful' the stress test is.

So back to Brits opening post - about reasonable scenarios. And whether 50% is reasonable, or extremely stressful. Well, I freely admit, I just don't know.

At least inflation isn't mentioned anywhere.

I couldn't find that article (I searched for that phrase) Well in that case it isn't much of a stress test then, maybe they should rename it to 'comfort test'

chucky

Exocet wrote: »

Just Googled (I know, I know)

let Google be your friend....

Exocet wrote: »

so there is room for interpretation about how 'stressful' the stress test is.

So back to Brits opening post - about reasonable scenarios. And whether 50% is reasonable, or extremely stressful. Well, I freely admit, I just don't know.

but that's the point they have to start somewhere but they don't know where to start either because they don't 100% know the state of the banks...

it's a good thing they're doing it but it's more of a feel good sentiment thing than anything else

Housebear51

brit1234 wrote: »

At the end he says 50% falls in residential and 60% falls on commercial property were reasonable for their stress test calculations on banks.

Why would commercial property fall more, I thought it would be the other way around?