If QE Was Withdrawn....

Barcap

A_Flock_Of_Sheep wrote: »

If QE Was withdrawn with immediate effect tomorrow how much do you think the markets would fall?

It seems the markets are propped up by investors riding the Equity QE gravy train and at a slight sniffle from the USA that QE may be tapered down people are selling off and it has had an effect.

If it was removed totally my prediction would be a 35 to 40% drop in the markets.

Your just angry you've missed the boat when the FTSE was in the 3k's in 2009... (and missed out on easy 100-1000% gains) keep dreaming it will go back there because it wont.

FatherAbraham

Glen_Clark wrote: »

And the most reckless of all - Osborne's 'moronic' interest free loans on £600k sub prime loans to pump up house prices - is just taking off.

The Help to Sell scheme (often called Help to Buy) does not provide loans. It provides deferred purchase.

Modelling such a scheme as loans will cause serious financial mistakes to be made. The finance provider part-owns the asset; "repayment" is actually buying that share out.

The important bit is that the value of the portion of the asset not owned by the initial purchaser grows in real terms, unlike a loan, which is based on repaying a nominal sum.

Normally inflation works to the advantage of soemone who borrows money to buy a house (http://monevator.com/cheap-re-mortgage-to-invest/).

Those who engage in deferred-purchase agreements, such as Help to Sell, find that they have a reversed position. Inflation means that the portion of the house which they initially couldn't afford remains unaffordable, unless they have exceptional earnings growth (which the average person won't).

Help to Sell enables house-builders to shift stock into the market, and might provide a boost to the trouble construction industry.

Anyone who enters a deferred-purchase agreement believing that it's a "loan" is going to find out over the next few years that they have mis-modelled their finances, and the deferred portion of the house is just as costly as when they couldn't afford it in the first place.

Beware of journos who call this scheme a "loan" scheme. They are unfit to write on personal finance.

Warmest regards,
FA

Thrugelmir

A_Flock_Of_Sheep wrote: »

Do people think we are imminently heading for an extreme major crash in the markets such as the one in 08/09 the financial crisis?

No. The financial system is past the worst. The current bubble will deflate slowly as reported Corporate earnings fail to excite. Tesco's yesterday being a classic example.

Thrugelmir

FatherAbraham wrote: »

Anyone who enters a deferred-purchase agreement believing that it's a "loan" is going to find out over the next few years that they have mis-modelled their finances, and the deferred portion of the house is just as costly as when they couldn't afford it in the first place.

Lenders are far tighter on affordability now than even a year ago. Something which the media fails to take into account with these schemes. Help To Buy only provided 2,000 mortgages in a year at no risk to the Treasury. So a lot of political hot air is being written.

srcandas

FatherAbraham wrote: »

The important bit is that the value of the portion of the asset not owned by the initial purchaser grows in real terms, unlike a loan, which is based on repaying a nominal sum.

It is important that the new home owners understand the valid point you make but in reality, for most, there are so many advantages in owning that they outweigh the negatives.

Pride of ownership changes people largely for the better. And if the state owned bit goes up in value so does the other bit. And in most cases the cost is no more than renting.

And even 2000 buys in a year creates employment

antrobus

Glen_Clark wrote: »

I know who you are. You are Sir Humphrey Appleby

If he is. Then he is Humphrey Appleby with an economics degree.:)

jabba42

srcandas wrote: »

Pride of ownership changes people largely for the better. And if the state owned bit goes up in value so does the other bit. And in most cases the cost is no more than renting.

And even 2000 buys in a year creates employment

Not sure how much of your house you own if you were on one of those 110% mortgages

veryintrigued

Barcap wrote: »

Your just angry you've missed the boat when the FTSE was in the 3k's in 2009... (and missed out on easy 100-1000% gains) keep dreaming it will go back there because it wont.

It doesnt come across to me that this poster is 'angry'. Clearly they are concerned about growth in the market after recently jumping in.

To me its a breath of fresh air and that there is a voice asking these questions rather than going along with the larger flock and continually talking the market up.

srcandas

jabba42 wrote: »

Not sure how much of your house you own if you were on one of those 110% mortgages

Please tell me more. Where do I apply for a 110% mortgage??

pqrdef

A_Flock_Of_Sheep wrote: »

If it was removed totally my prediction would be a 35 to 40% drop in the markets.

If the BoE dumped £375bn of gilts on the market tomorrow, it would only get a fraction of what it paid for them. Then we'd have all that money out there with no backing at all. Time to oil your wheelbarrow and start wondering how soon the Footsie will pass 7,000,000,000.