House market final props could soon collapse

Flight2quality

I said a few weeks ago that only two things were holding up UK house prices in the face of collapsing consumer incomes: forbearance on the part of the banks (changing the terms of mortgages and so on to prevent people ending up being in arrears) and ultra-low mortgage costs.

This week, the scale of the forbearance in the market became clear. According to the Financial Services Authority, 5-8% of all UK mortgages would be in arrears if the banks weren't scrabbling around looking for ways to prevent it happening. But I can't see that number being allowed to go much higher.

And what of mortgage rates? If forbearance is so huge at a time when rates are at their lowest for 300 years, what happens when the costs of a mortgage rise? If you were hoping that 2011 was the last year of falling house prices, I suspect you will find next year deeply disappointing.

http://www.moneyweek.com/investments/property/uk/merryn-somerset-webb-2012-housing-market-collapse-14900

wotsthat

Flight2quality wrote: »

I said a few weeks ago that only two things were holding up UK house prices in the face of collapsing consumer incomes: forbearance on the part of the banks (changing the terms of mortgages and so on to prevent people ending up being in arrears) and ultra-low mortgage costs.

....and three times a day since.

Still, if you say it often enough it might just come true.

Flight2quality

wotsthat wrote: »

....and three times a day since.

Still, if you say it often enough it might just come true.

Who are you talking about? This was in the FT.

If it's in the press it's in the price.

CLAPTON

collapsing consumer incomes?

how much have they collapsed?

paulmapp8306

Generally - Lots in real terms.

Its probably closer to say disposable income rather than incomes in general. Obviously few have lower incomes (some will - including those wholoose jobs), however, with lower than inflation wage rises (for all but the already "fat cats") and fuel, utilities, food all rising in cost at or above general inflation rates -- In those real terms Most have a lower income.

paulmapp8306

Cawse in point - and yes I know one person does not make most - that is always brought up, hopwever as an EXAPMPLE.

Im public sector. Had a wage freeze last year, and another this year. The next 2 years are capped at 1%. So I will have had a wage rise of 2% in 4 years. Inflation is around 5% - so in those same 4 years the cost of living has risen 20% (actually more with compund interest), and many essentials like fuel/gas/electric will have gone up much more than that. In real terms in 18% worse off. Thats a fall in income.

CLAPTON

the economy is flatlining
GDP is likely to fall a little
unemployment is increasing a little
house prices are drifting down
problems with the euro are unresolved

but none of this justifies the use of the word 'collapse'

try comparing us with greece or ireland

The-Joker

CLAPTON wrote: »

the economy is flatlining
GDP is likely to fall a little
unemployment is increasing a little
house prices are drifting down
problems with the euro are unresolved

but none of this justifies the use of the word 'collapse'

try comparing us with greece or ireland

I would not agree that the economy is flat lining. Things are not looking that good. Problems have been pushed into the future but the day of reckoning will come.

You are also underestimating your 2nd point. GDP will be falling for some time and more than a little.

Real unemployment is going up for some time yet, also more than a little but as usual the government will fudge the numbers.

"house prices are drifting down
problems with the euro are unresolved"

House prices are only drifting down nominal terms but in real terms they are more than drifting down. They will continue to fall in relation to real inflation. The problems in the Eurozone will make credit cost more and be harder to get.

What has happened is that the world has borrowed prosperity from the future. The debts will keep going up around the world which is again borrowing more prosperity from the future. This is why some bubbles have been inflated even more than they should have. The housing bubble in the UK will pop when cheap easy credit can no longer be sustained. Cheap easy credit is not sustainable so it will not be sustained.

FTBFun

So 2 more logins, all thanking each other. This is getting a bit ridiculous now.

ess0two

Same words over and over 'props' 'props'

Flight2quality

ess0two wrote: »

Same words over and over 'props' 'props'

yep, FT, Moneyweek, bloke down the pub. Everyone is talking about the props holding up house prices.