50% house price falls

tr3mor

Rkelly wrote: »

Up where I live in the north east there was a 10-20% fall at most in the early 90's.

Toss in a good dose of inflation and that's a 30% price drop.

Remember that sub-prime and BTL mortgages weren't commonplace in the 80s. Some people will soon be suffering from negative equity on a dozen houses!

50% is a lot. Probably a worst case scenario. It would need some outside influence on the economy first - Cold War II anyone?

adr0ck

!!!!!!? wrote: »

Even if one assumes that you can get a 3-bed semi for 150k (doubtful in most parts of the country) then a couple on 20k each, with a 10k deposit saved would be looking at borrowing 3.5x JOINT salary.

Traditional 'sensible' lending multiples are 3.5x single, 2x joint. 3.5x joint would be really stretching it given that the chance of one of the couple losing their job is double that of a single person losing theirs. And what do you do when you want kids?

So even by your own rather suspect figures, houses are stupidly overpriced.

you can get a 3 bed terrace or semi in most parts of the country for £150k

just look on rightmove or are you too lasy?

codger

RabbitMad wrote: »

Codger - what a load of old testicles!

Banks and BS have merely provided a service, and are in business to make money. They do not force anybody to borrow beyond their means.

We live in a free society and that means we must be free to make mistakes and suffer their consequences.

The current housing market boom is nobody's fault, its just market economics at work.

What is your solution to this? Nationalise the housing stock of this country? Have the banks opperate in an anti-competitive way all charging the same interest rate set by the government?

The point I was evidently failing to illustrate was how far we have moved from an era when, perhaps laughably, there was such a thing as the concept of social responsibility.

When neither a bank, nor a building society, would lend recklessly in the pursuit of a profit that it knew -- emphasise: it knew; because the brains behind those banks, and those building societies, were no less sharper back then than the brains behind them today -- could flow only from the exploitation, and even, the ultimate dispossession, of their borrowers.

The reason why those institutions operated lending ratios of between x2.5 to x3 household income was because of social responsibility.

They didn't pretend, as per your post, that what they offered was a mere take-it-or-leave-it "service".

They knew, exactly as they do now, that when it comes to matters of the hearth, they were also dealing with matters of the heart.

And that when a borrower approached them to fulfil her or his dream of home ownership, they needed to be careful of that dream and of that borrower's best interests. Because if you add up all the borrowers together, you not only have a collection of dreams and dreamers. You also have what we call: Society.

And now? Oh, come on, rabbitmad. I'd immediately agree with your phrase "and are in business to make money" if that's how the banks and the building societies had the guts to just once acknowledge that reality.

But: they don't. Because honesty is not the currency of any of those 'institutions'. Only money. And nothing else. The damage wreaked by their behaviour is of not the slightest concern to them. Nor to regulators. Nor to governments. It's "the market", as Mrs Thatcher said.

In the fog of profitable obfuscation that's been created by all such so-called institutions, "borrowers" have become "customers" and loans have become "products" and the whole concept of social responsibility has been systematically swept away. Put it like this:

Not that long ago, were you the branch manager of such an institution -- bank, or building society -- and you refused a loan because you believed the prospective borrower couldn't afford it at that time, or was unlikely to be able to afford it should rates change in the future, then your head office would have said: Good. How prudent.

If you are the branch manager of such an institution now, and you refuse a loan on similar grounds, then oh dear Gawd, what the hell are you doing?

You're there to get punters in hock to you (under the guise of providing a service.)

You're there to exploit every which way you can the fundamental human need for hearth and home, and if you wind up trampling that dream underfoot well, hey, that's the way of the world. Hardly your fault.

You're there to seal as many loans as you can or else branch targets won't be reached, regional targets will miss by a mile, and way, way up the line your departmental executive director will not get his or her £500,000 to £1,500,000 because it's performance related -- and also because, because. . .

You've committed the ultimate crime of all. You failed to shift product.



As for your observation that banks and building societies "do not force anybody to borrow beyond their means. . . We live in a free society and that means we must be free to make mistakes and suffer their consequences" I genuinely could not disagree more. Of course we don't live in a free society.

A free Society is where there is a commonality of language and understanding, the existence of which allows all members of that society to exercise their individual and collective freedoms in as informed a fashion as is possible.

And you seriously think this one is?

There are people who have been loaned, are being loaned, and will continue to be loaned, sums of money not on the basis of their understanding of the language of economics -- God above, many of 'em think APR represents the first three letters of the fourth month of the year -- but because of their vulnerability.

Because of the putative asset value which they've brought into the bank or building society and which the bank or building society will be all too happy to realise when it chucks 'em out on the street as defaulters (having first pocketed all the arrangement fees, the insurance scams, and anything else that can be sold as "a service". Or "a product".)

Yes, of course it's "the market."

But it's a market devoid of scruples and of any sense of obligation to Society as a whole. It's a market which couldn't care less if house prices are driven upwards to a point where a generation cannot get on the housing ladder and so must be driven into the arms of buy-to-letters who are as equally delighted as the banks and the building societies at the way what was once attainable has now been driven beyond reach.


As to the "economics" of all this: I've lost track of the number of conversations my wife and I have had over the years with people both here and abroad about "how well" they've done out of the housing market.

Right. As if they've earned it. As if we've earned it. As if we've worked every minute of every day to amass a capital asset of such astonishing value. . .

When in fact all we've done is sit back on our !!!!!! and do nothing at all.

That isn't prosperity, but delusion. That isn't a recipe for a mature and equitable Society at peace with itself but one for frustration, deprivation, heartbreak, resentment, envy, and alienation.

Yet that's exactly the recipe cooked up by every bank and every building society in the land which blithely defends itself in precisely the same terms that you have deployed: "we're merely a service"; "we don't force anyone to borrow from us". Or even: "we're here to help".

Yeah. Right.

Go have a look at the salaries of the senior management of -- for example -- Northern Rock and see just who has been helping who.

On which note, I'm glad you mentioned "market economics" if only because it's one of the most repugnant cliches in our language, one that's always touted in defence of the indefensible, in advantaging the already advantaged -- but never advantaging the disadvantaged.

As we've just seen, typically, with Northern Rock -- a wilfully reckless lender, hungrily racing after profits at a time when it knew -- it knew -- it could only shift "product" by borrowing from hugely volatile capital markets to finance the loans it was making (though on properties which it could always, as allowed by market economics, possess.)

Market economics should by rights have dictated that Northern Rock was exposed for the fast-buck outfit it truly is. But instead. . .

Here comes the British taxpayer. Guaranteeing Northern Rock's liquidity and Northern Rock's solvency. And more than that: guaranteeing the liquidity, the solvency, of any other so-called "institution" which wishes to behave in similar fashion: to lend recklessly, to exploit ruthlessly, and to care not a jot about anything other than corporate profit, shareholder return, and executive reward.

As to your question about government intervention (which, of course, has now already happened), it's rather missing the point to skip the principle and instead focus on the minutae.

Because none of this is about the setting or maintenance of interest rates. The point is that responsible lending, by responsible lenders, threatens neither the individual borrower, nor the national economy, nor Society as a healthy and cohesive whole.

Whereas irresponsible lending does exactly the opposite.

Which takes me back to my original post. Thirty years ago (and less) banks and building societies worked on one shared principle:

Can prospective borrowers afford to take on this loan?

Now, it's changed to this:

Can prospective borrowers be persuaded into thinking they can afford to take our product?

The difference in the two questions isn't one of semantics.

The difference explains why we are where we are now.

And it also explains why I've nothing but contempt for our banks, our building societies, and a government currently headed by one who is either the biggest, or the most epically incompetent, hypocrite I've seen at The Treasury in my lifetime: a dour Scot who claims that thanks to 10 years of his stewardship of The Exchequer, the UK economy has been managed "prudently".

I therefore look forward to the time when it will be declared prudent to not only assist outfits like Northern Rock to continue to thrive, but also all the home-owners conned into believing they could afford the "product" they were so beguilingly sold -- because, "market economics" or not, they actually deserve to thrive, too.

Snow_Dog

codger wrote: »

The point I was evidently failing to illustrate was how far we have moved from an era when, perhaps laughably, there was such a thing as the concept of social responsibility.

When neither a bank, nor a building society, would lend recklessly in the pursuit of a profit that it knew -- emphasise: it knew; because the brains behind those banks, and those building societies, were no less sharper back then than the brains behind them today -- could flow only from the exploitation, and even, the ultimate dispossession, of their borrowers.

The reason why those institutions operated lending ratios of between x2.5 to x3 household income was because of social responsibility.

They didn't pretend, as per your post, that what they offered was a mere take-it-or-leave-it "service".

They knew, exactly as they do now, that when it comes to matters of the hearth, they were also dealing with matters of the heart.

And that when a borrower approached them to fulfil her or his dream of home ownership, they needed to be careful of that dream and of that borrower's best interests. Because if you add up all the borrowers together, you not only have a collection of dreams and dreamers. You also have what we call: Society.

Sorry, got to break my silence on this one its too rich, you cannot be serious, do you really believe that load of cobblers or did you read it in the Morning Star? Your recollections of the past seem to be viewed through some very thickly lensed rose tinted binoculars.

You want to write to the Socialist party and ask if you can knock up some of their propaganda, the fantasy above would be a good start.;)

dolce_vita

:T

Codger - Whilst I agree with most of what you've said in your last post, I've thanked you just because of the length of it.

Bloody hell.

Have you just got a new computer or something?

pickles110564

tr3mor wrote: »

Remember that sub-prime and BTL mortgages weren't commonplace in the 80s. Some people will soon be suffering from negative equity on a dozen houses!

Maybe but interest rates wont hit 15% which caused the problems last time

before_hollywood

RabbitMad wrote: »

Codger - what a load of old testicles!

Banks and BS have merely provided a service, and are in business to make money. They do not force anybody to borrow beyond their means.

don't exactly always lend responsibly though do they?????

pickles110564

codger wrote: »

The point I was evidently failing to illustrate was how far we have moved from an era when, perhaps laughably, there was such a thing as the concept of social responsibility.

.

You voted in the red's now we are all paying the price for rubbish spin and that vomit enducing song! I can still see that stupid smile on his face when he was thinking " I cant believe those stupid thick voters have fallen for us we will make loads of money and it will take 10 plus years before we get caught out and me an cherie will be away with the fairy's"

You all are Mugs

kodokan

pickles110564 wrote: »

Maybe but interest rates wont hit 15% which caused the problems last time

Come on... pay attention at the back there! Things to ponder:

A mortgage of £50,000 with rates of 15% is the same as a mortgage of £150000 with rates of 5%.

Rates going from 7.5% - 15% means people's mortgage interest payments double.

Rates going from 3.5% - 7% also means people's mortgage interest payments double.

See the patterns emerging - the relationship between rate/ proportion of rate increase/ amount of debt? Now, let's just recap the last few years of base rate movements...

kodokan

obsessed_saver

Well, the US Fed has reduced their interest rates by 0.5% to 4.75%.

With the UK inflation rate at 1.8% this month, either the BoE will hold rates... or more likely succumb to pressure and reduce rates... and thus, fuel the bubble more.