When interest rates to go back to normal many more distressed sellers?

Flight2quality

I wonder what percentage of property owners in the UK will still be able to afford their mortgages when interest rates are back up to normal? Especially when you think about average incomes are falling and unemployment is looking like it will keep going up for years yet.

Its not looking good for the bear market in housing coming to an end any time soon.

PaulF81

Thrugelmir wrote: »

Skipton and Norwich and Peterborough building societies. Shortly to be joined by the Manchester BS. Have all broken their link to base rate guarantees.

Potentially the thin end of a big wedge.

Got a link to that? very difficult for HSBC (in my case) to renage on a legally binding 25 year tracker. And yes, I have checked the smallprint.

Flight2quality

DervProf wrote: »

I`ve suggested that rates should be increased if there is a hint that he economy will allow it. I suspect, given recent history, that the BoE won't be able to resist the urge to enjoy "just one more wafer thin mint".

It does not matter if the economy will allow it, the problems with keeping interest rates too low for too long are greater than trying to kick the can down the road. Keeping rates too low for too long is just postponing the inevitable. Its just patching the wounds and trying to stop the bleeding so fast.

Lets face facts, all the measures have not helped they have just postponed the day of reckoning. What else can they do now? Answer abuse the currency supply all over the world.

The GFC is about to get a lot worse, you aint seen nothin yet.

Property is in a bear market all over the world. Stock markets and commodities are also going down, the only things going up are unemployment and the supply of created out of thin air units of fiat currency.

Thrugelmir

PaulF81 wrote: »

Got a link to that? very difficult for HSBC (in my case) to renage on a legally binding 25 year tracker. And yes, I have checked the smallprint.

HSBC don't have the same funding issues that some other lenders face. As have access to cash from Asian operations.

RenovationMan

Out of interest, are 'all' the PM bugs now leaving PM and turning into housing bears? There seems to be a shift from talking up silver to talking down property. I wonder if it will make as significance a difference for property as it did for silver. Time well spent, clearly.

PaulF81

Sorry to break it to you, but the "GFC" that we had before was a wakeup to the central banks globally. The Chair of the BOE and deputy head have said as much. They all acknowledged shortly after the credit crunch that Interest Rates are too blunt an instrument to control asset price bubbles. In future, expect the combined effects of Interest Rates, the level of QE in the economy, maximum lending limits (circa 1970s) and maximum salary multiples to be used together to control not only CPI inflation but also other emerging asset price bubbles.

For example, if the signs of excessive HPI occur again, expect the BOE to slap a maximum mortgage lending cap on banks across the UK. We had one until 1980 by the way. Another example is the announcement of splitting of retail and investment in 2019. Expect more from the BOE as it increasingly takes over regulation of the markets from the FSA.

Check out what Spencer Dale said back in 2009 if you want to know what the BOE are really thinking. And you wont like it if you have lots of savings and are expecting a 10% return any time soon.

Unlike recessions of the late twentieth century, this twenty-first century version is not the result of deliberate, but belated, attempts to slow the expansion of money spending in order to bring down inflation from very high levels. Inflation is close to the Government’s 2% target. This recession has at its heart a crisis in the banking system; a crisis that has strangled the supply of credit and undermined public confidence. For the first time in fifty years, the total amount of money spent in our economy during the first quarter of this year was lower than a year earlier. The era of ‘Great Stability’ is over.
The Great Stability followed hot on the heels of the introduction of the inflation targeting
framework for monetary policy. Some attributed part of the improvement in economic
performance to better policymaking. The abrupt end to that stability has, in turn, led the inflation targeting framework to be questioned.
Today I want to explain why, despite recent events, I believe that inflation targeting should remain a mainstay of macroeconomic policymaking in the UK. But we have to learn from the crisis, and I will discuss my views on the way in which the policy framework needs to be strengthened. I will conclude with a brief review of our asset purchase programme and, in particular, respond to some of the comments made about the programme.

http://www.bankofengland.co.uk/publications/speeches/2009/speech395.pdf

Read it. I bet you wont like it. Especially this bit, after the hawkish bumpf intro to placate pimco and other bond purchasers.

But policymakers also need better tools to back up these judgements with actions. Short-term interest rates are a blunt instrument best deployed maintaining a broad balance between nominal demand and supply. They are not well suited to the task of managing asset price bubbles and economic imbalances. They may be wholly ineffective in addressing some types of imbalances, particularly those with an international dimension. And, even for domestic imbalances, short-term interest rates would probably need to be held substantially higher for a persistent period in order to suppress rapid rises in asset prices or growing imbalances. Such policy actions could generate significant economic costs. The practical difficulty of implementing a policy of “leaning against the wind”, where the main policy instrument is short-term interest rates, should not be underestimated. If, as policymakers, we were successful in preventing a bubble from inflating, it might appear as if we were responding to phantom concerns. The bubble or imbalance would be nowhere to be seen, but interest rates would be higher, inflation would undershoot the inflation target and we would appear to have inflicted unnecessary economic hardship. That could undermine public faith and support in both the inflation target and the MPC.

For me, the single most important lesson from the financial crisis is the need to expand the range of instruments available to policymakers. The inflation targeting framework provides the scope to respond to asset price bubbles and to imbalances that threaten future economic stability. But short-term interest rates are not well suited to managing such risks.

Until we have a jobs recovery and strong and stable income growth, rates are going nowhere. The market can talk about rate rises at the end of 2012, I would be very surprised to see rates above 1% in the next 24 months. Until then, fiscal policy (especially in terms of taxation) will be used as another tool in controlling asset prices. We are all skint. Mid rate tax has gone up, and despite protestations to the contrary, the Conservatives now know that unfortunately, any hopes of delivering significant tax hikes are a pipe dream.

Unless they want to see interest rates shoot up that is.

PaulF81

Thrugelmir wrote: »

HSBC don't have the same funding issues that some other lenders face. As have access to cash from Asian operations.

So in other words, what you mention is a complete non issue for me, and anyone wanting to port to a HSBC tracker mortgage then. :rotfl:

Thrugelmir

PaulF81 wrote: »

and anyone wanting to port to a HSBC tracker mortgage then.

Wanting to and getting are different matters.

PaulF81

Thrugelmir wrote: »

Wanting to and getting are different matters.

Are you suggesting that HSBC should start issuing NINJA loans or take on risky mortgages? HSBC are currently doing a 2.4% mortage for those lucky enough (like me) to have over 40% equity and a diamond lending history.

Thrugelmir

PaulF81 wrote: »

Are you suggesting that HSBC should start issuing NINJA loans or take on risky mortgages?

Not in the least. At higher LTV levels HSBC decline far more applications than they accept.