House Price Crash 3

lynzpower

I agree Pobby.

Im certainly not the only person on these forums who have experienced that "change of circumstance" job loss/ illhealth blah blah that everyone thinks wont happen to them. Lucky for me, Ive had a bit of forwarning, and thus jumping well before the bailiffs get involved, and I will survive this in a muhc stronger position than I could have. Unfortauntely, we are seeing huge influxes on the Debt free baord at the moment, an increasing amount of them quite simply cannot afford thier overheads (eye watering mortgages even to me on my london IO!) let alone thier debt.

I know this isnt anywhere near a statistic - but the sheer number of people in crisis coming onto ONE website daily, is somewhat frightening. I wonder just how many people willl lose thier homes through debt problems & slightly interest rates in months to come?

Scary.

roswell

Personnal Insolvancy stats are due to be released in the morning, as again there expecting a rise, bigger debt / more insolvantcies surely that alone = house prices falling .... unless XYZ bank decides to move the goal posts some more ...

meanmachine_2

House Price Crash 2:

Here's an interesting link, showing IRs over the last 30-odd years.

http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

As you can see it nails the lie that interest rates "suddenly doubled" in 1989.

In fact it took 18 months to get from 7.5% to 14%, and even then rates averaged c10% in the preceding years.

What happened in 89 was a combination of high interest rates together with a govt tax change, namely the end of mortgage relief.

All you need now is rates to nudge 6% and some kind of govt tax clawback, like the mooted council tax changes and that's your double whammy.

The chances of the govt doing something stupid and greedy, a la 1989? Got to be very high.

lynzpower

mean machine

One thing that concerns me is that this government wouodl be unlikely to increaser Council tax ( obviosuly its the LAs that set & collect, but to increase the need to collect higher) wthout setting some sort of increase to council tax benefits to cope with it.

Bear in mind the "economy" is about the only thing that labour have done well on. People feel richer, generally feel services are beter ( even though they re more expensive) and although the debt problems are going through the roof, thats not strictly governments fault- surely?

I just cant see council tax being a claw back & even if it was, could you enlighten me a bit more why it would be needed- am new to the macro-ecs but politics is my thing

meanmachine_2

lynzpower wrote:

I just cant see council tax being a claw back & even if it was, could you enlighten me a bit more why it would be needed- am new to the macro-ecs but politics is my thing

Well there is the small matter of a massive hole in the government's finances.

I don't think the govt would do anything on purpose to rock the property market. It's all about unintended consequences.

The phasing out of mortgage tax relief wasn't predicted to crash the market, but that, combined with a second factor did.

You seem to have a lot more faith in politicians than I do!

lynzpower

Well i wouldnt use the word faith MM!!

but I do think with the cameron effect, and the precarious position of blair, plus a lot of NHS perception/reality problems hitting the headlines at the mo I think Brown simply will not allow something like this to jeapordise his position.

Its almost as if to say, who is actually our PM, we see nothing of blair at the mo really. Patently keeping a low profile awaiting the big handover IMHO.

He certainly doesnt want to leave under a collapsing economy, he wants the blaze of glory and I think hes hanging on till things pick up a bit, and secondly Brown wont stand for it either.

Practically Im not sure what mechnism they would use to increase local taxation. the only thing I can think of is eithedr the doing away with some sort of benefit or credit ( surely they wont get rid of WFTC, depite how hopelessly its being administered?)

I dunno

F_T_Buyer

meanmachine wrote:

House Price Crash 2:

Here's an interesting link, showing IRs over the last 30-odd years.

http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

As you can see it nails the lie that interest rates "suddenly doubled" in 1989.

In fact it took 18 months to get from 7.5% to 14%, and even then rates averaged c10% in the preceding years.

What happened in 89 was a combination of high interest rates together with a govt tax change, namely the end of mortgage relief.

All you need now is rates to nudge 6% and some kind of govt tax clawback, like the mooted council tax changes and that's your double whammy.

The chances of the govt doing something stupid and greedy, a la 1989? Got to be very high.

People love to play that card, they also love to mention black wednesday (16th Sept 1992) where interest rates went to 15% for one day.

Even if you cross reference is against Nationwide HPI (http://www.nationwide.co.uk/hpi/historical.htm) you'll see in the year to Q1 1989 prises rose 32% where interest rates went from 8.375% to 12.875% over the same period.

Quite simply it was a bubble and it ran out of steam, the Miras was just a reminder to everyone how stupidly high prices were. Just like now really.

ManAtHome

Central govt gives LAs some cash - they can either freeze or cut this pretty much at will (or increase it during election years...). LAs also have substantial and increasing pension liabilities.

I think nulab have been politically expedient with the economy, but there seems to be little based on economics. As others have said, there are huge and growing holes and comittments stretching many years into the future. Looking unlikely that either B or B will bow out in glory, but even if they do, I can't see them getting a good press in the (future) history books.

meanmachine_2

Strange there's no reference to the Black Wednesday debacle in that BoE pdf.

And notice that rates are about to go back to 1999 levels, when the REPO was 5%

Now that really was the time to buy!

Market_Oracle

I wonder if the Japanese in 1990 knew what was in store for them during the next 16 years of falling prices

Perhaps FTB's are looking at the wrong market