Mervyn King: UK House Prices Have Recovered 2/3 of Losses

HAMISH_MCTAVISH

Oct. 25 (Bloomberg) -- U.K. house prices have erased about two thirds of their losses caused by the financial crisis, Bank of England Governor Mervyn King said.

While there are no “evident” signs of a recovery in the U.S. housing market, Britain’s property prices have erased about 10 percentage points of the 15 percent drop they endured after mortgage lending dried up in 2008, King said during questions at an event organized by the Economist magazine in New York today.

Rates of arrears in the U.K. remain “much lower” than they were in the 1990s, he said.

The U.K. planning system guaranteed a lack of housebuilding, King said.

The common factor between the property markets of Britain and the U.S. is that they were drvien higher by low real interest rates, he said.

Anger from the crisis may grow in years to come, King said.

Lower real interest rates have certainly enabled a generation to afford to buy houses where prices have been driven up by the shortage of supply.

With homeownership levels rising to almost 70% as a result. Although sadly they are falling now.

And even the BOE states the new neutrality level of interest rates, (where keeping them below this point spurs growth, and raising them above this point will create the demand destruction needed to combat inflation) moving forwards will be closer to 3% than the 5% or 6% it was over the last decade. So future buyers can expect to enjoy similar house price growth whilst maintaining affordability.

The anger from the crisis however will be seen from young buyers who are now effectively locked out by mortgage rationing. They will spend the next decade being unable to benefit from these once in a generation low rates, and enriching their landlords.

I'd be angry about it too.:cool:

DervProf

HAMISH_MCTAVISH wrote: »

I'd be angry about it too.:cool:

Why not turn your anger towards what caused the lending drought in the first place ?

I didn`t hear much anger when NR, B&B etc were lending like nothing could go wrong.

Get your way (95% mortgages etc) and we`ll soon be back to 100%, then.........)

HAMISH_MCTAVISH

DervProf wrote: »

Why not turn your anger towards what caused the lending drought in the first place ?

Pretty sure that no matter how loudly I shout, my voice won't carry over the Atlantic to the shores of America.

And I doubt those Americans who mis-sold sub-prime mortgages and then fraudulently packaged them as AAA assets would listen anyway.

For the umpteenth time, UK mortgage lending standards and UK issued mortgages had absolutely nothing to do with the global financial crisis that froze the global credit markets and that is still the cause of mortgage rationing.

Graham_Devon

HAMISH_MCTAVISH wrote: »

And even the BOE states the new neutrality level of interest rates, (where keeping them below this point spurs growth, and raising them above this point will create the demand destruction needed to combat inflation) moving forwards will be closer to 3% than the 5% or 6% it was over the last decade. So future buyers can expect to enjoy similar house price growth whilst maintaining affordability.

I remember a wise man one saying that boom would no longer lead to bust - erm, dunno what happened there.

I remember Mervyn King saying (this time last year) inflation would be under target by this point this year - erm, dunno what happened there.

Of course THIS paragraph, is absolutely undeniably true. And we can all rest assured and base our future wealth and debt repayments on something the BOE has said (most of which, to be fair, they have got wrong).

Graham_Devon

HAMISH_MCTAVISH wrote: »

For the umpteenth time, UK mortgage lending standards and UK issued mortgages had absolutely nothing to do with the global financial crisis that froze the global credit markets and that is still the cause of mortgage rationing.

Yes, but, you are wrong.

http://news.bbc.co.uk/1/hi/business/6954843.stm

What you gonna do now? Stick your fingers in yoru ears and go la la la....we had nothing to do with it when faced with:

At least seven UK sub-prime lenders have raised their interest rates or withdrawn their mortgage ranges.

DervProf

HAMISH_MCTAVISH wrote: »

Pretty sure that no matter how loudly I shout, my voice won't carry over the Atlantic to the shores of America.

And I doubt those Americans who mis-sold sub-prime mortgages and then fraudulently packaged them as AAA assets would listen anyway.

If I was chucky, I`d be questioning why you had to mention that it was Americans who mis-sold mortgages.


I knew the American factor would be mentioned.

Let`s consider that the Americans weren`t "being naughty" in their mortgage market.

a) What would that have meant for the UK market ?

b) if you think it wouldn`t have made any difference (not fuelling our boom), where would we be today ? Would we have had high HPI ? Would NR still be offering 125% mortgages, or would they have gone further (followed by more of their competitors) ?

HAMISH_MCTAVISH

Graham_Devon wrote: »

Yes, but, you are wrong.

http://news.bbc.co.uk/1/hi/business/6954843.stm

What you gonna do now? Stick your fingers in yoru ears and go la la la....we had nothing to do with it when faced with:

From your article.....

It follows the liquidity crunch in the financial markets caused by mortgage defaults in the US

I never claimed UK sub-prime didn't exist. Just that it was a tiny percentage of lending in the UK, and that it didn't cause the liquidity crisis and subsequent crash.

Do try to keep up at the back there Graham.

julieq

Graham_Devon wrote: »

Yes, but, you are wrong.

http://news.bbc.co.uk/1/hi/business/6954843.stm

What you gonna do now? Stick your fingers in yoru ears and go la la la....we had nothing to do with it when faced with:

Graham dear, do you actually read any of the articles you post?

Third or so paragraph from the article you quoted:

"It follows the liquidity crunch in the financial markets caused by mortgage defaults in the US as the housing market slowed dramatically."

Which is exactly what Hamish said.

DervProf

"It was the Americans that done it".

OK, let`s accept that they did.

I`ll ask again. If the American financial system has damaged our system, does that not mean that our finances were closely linked to theirs ? If so, is it too much of a stretch of the imagination to believe that without their "lax lending", our banks would not have been able to lend so much to fuel our HPI ?

Would it have been possible for NR to be offering 125% mortgages, and other banks following with ever more "generous" mortgage deals, without the Americans doing what they were doing ?

1984ReturnsForReal_2

Was Mervyn being quoted from 6 months ago?

HAMISH_MCTAVISH

1984ReturnsForReal wrote: »

Was Mervyn being quoted from 6 months ago?

From this week.