Why prices must not fall, but have to fall

macaque_2

Kohoutek wrote: »

If house prices fell by 10%, the government would probably introduce more support for those struggling with mortgages, banks would only repossess as a last resort and they would sell inventories of repossessed property gradually, not all at once to cushion further falls in house prices.

This is the 'nanny will save us' solution. I'm afraid in this case, nanny is more broke than the borrowers.

ukcarper

If someone was on a 100% interest only mortgage and paying all or almost all of the monthly instalment why would the banks foreclose. I’m not sure on the mark up of most mortgages but I’m sure they could still make a profit on say 75% of the monthly instalment so why would they foreclose and lose at least 10% or the original loan.

globalds

macaque wrote: »

If you are hoping for a repeat of the 70's, I think you are wrong.

I am hoping for no such thing.

I am just pointing out that if you start applying a load between 2, 3 or more fixed points and then assume there can be only one point of movement , then you are being naive.

For my peneth worth I think some external force may cause interest rates to rise ..but I don't have any idea what that would be ..Some kind of black swan maybe ?.
If not that ,then I know that inflation can only go on for so long in a system before people are forced whether with or without a union to ask for higher wages.
The next big inflation feel will be holidays ..I heard people should expect it to feel 15% more expensive this year.
As a holiday maker who chooses Asian destinations I can tell you it is higher than that.The £ has fallen massively.

Losing_the_way

The market is too valuable politically to be let to fall. As has already been pointed out, if and when rates rise there will be some measure to support those on IO who are unable to manage. It's back to that old chestnut, its too big too fail. Remember that the banks don't want non desire repossessions, just state support if needed.

debtistheft

The housing bears on here are just one purchase away from being housing bulls. Choose the third option and walk away from property completely.

Kohoutek

macaque wrote: »

This is the 'nanny will save us' solution. I'm afraid in this case, nanny is more broke than the borrowers.

I would be careful what you wish for. A situation where the banking sector is insolvent again and the government is unable to act wouldn't be very pleasant for anyone.

Kohoutek

debtistheft wrote: »

The housing bears on here are just one purchase away from being housing bulls. Choose the third option and walk away from property completely.

Where do you live mate, in a igloo of silver bars?

Thrugelmir

macaque wrote: »

This week we have seen a local council outsourcing back office work to India. If you are hoping for a repeat of the 70's, I think you are wrong.

Different era to the 70's. Technology has seen to that with far fewer people required to fulfill the same functions.

Globalisation has been underway for 20 years now. So too late to reverse the trend.

JonnyBravo

macaque wrote: »

The stalemate between bulls and bears has continued for a couple of years now and neither side has won the case convincingly (despite the daily declarations of victory by some contributors on this formum).

You mean people like you?

joerugby

There is a very interesting article in today's FT. Here's a brief quote:

"The key point – and the one that investors should keep firmly in mind – is that the UK base rate at 0.5 per cent is not normal. It was never this low in the 18th century, in the 19th century or indeed in the 20th century. Up until our recent crisis, the floor for rates was always 2 per cent. It has also always hovered a couple of per cent above inflation and that is, eventually, where it will return to. When it starts to do so, mortgages will become less affordable, the forced selling will finally begin, and prices will fall."

http://www.ft.com/cms/s/2/8d174918-8dfd-11e0-bee5-00144feab49a.html#axzz1OKP6dij5