Moody's have downgraded UK from AAA to Aa1

NPowerUser

Another consequence of losing the AAA rating is speculators hammering the pound, fuel & petrol go up, adding to inflation & cost of all transported goods go up.

Tories will not risk losing their core supporters by allowing house prices to crash, even though most not in negative territory would welcome more realistic house prices.

JohnRo

BTL slum lords are their core supporters?

Mortgage payers might share a common interest with the insolvent banks in seeing interest rates artificially suppressed, but the establishments drive to devalue the pound, make borrowing super cheap and make everyone else with monopoly money pay for it, is only about keeping the housing bubble inflated and the banks in business and bonuses. The government aren't doing this financial meddling and experimentation so middle englanders can sit at home feeling smug about how cheap the mortgage is and vote accordingly.

If the BoE wants things to go in a different direction, they will.

grey_gym_sock

a lot of home owners - perhaps most - seem to feel happier when house prices are higher, or at least not falling - even if they're nowhere near being in negative equity. this is not entirely rational. since if you need a house, and you have a house, it's kind of irrelevant what it's worth. and many ppl have children struggling to buy their first home.

so there is political pressure not to let house prices fall. however, i think the main motivation of government/BoE policy is to prop up the banks.

but just considering the housing market, i think what we've had - limited falls in nominal prices, bigger falls in real terms - has been a fairly good way of deflating the housing bubble. because bigger falls would create more problems with negative equity.

OTOH, i think keeping mortgage rates so low for so long is becoming dangerous. because they have to rise at some time. and the longer they stay very low, the more ppl will fail to plan for mortgage rises, and therefore the worse the effects will be when they do rise.

Thrugelmir

grey_gym_sock wrote: »

OTOH, i think keeping mortgage rates so low for so long is becoming dangerous. because they have to rise at some time. and the longer they stay very low, the more ppl will fail to plan for mortgage rises, and therefore the worse the effects will be when they do rise.

The other side of the coin. Is that it's allowing lenders time to reduce the risk in their lending books.