Panic over?

jebervic

The Fed lowers interest rates, BOE to follow, cheaper lending and the glut of houses due to HIPS cleared. So can we expect house prices to resume modest increases?

The poll stating a rise of 5% should say A rise of 5% or less

m00m00

all today has done is put a little bit more air in the bubble, so it will have a bigger bang when it's popped. Popped it will be at some point.

pickles110564

Magic all you STR's have got it wrong just like i said before, your wishful thinking and talking up a crash and worrying everyone has gone tits up

Alan_M_2

My marketing manager is currently trying to sell his house. He'd had an offer on it that was withdrawn last Friday, the buyer had a Northern Rock mortgage agreement and had been advised by two friends in the banking sector to pull out and sit tight for a while. The house in question is a 3 bed semi at £300K.

Now, He's a reasonably level headed guy but He's starting to worry He's stuck with a lame duck and can't shift it and as a result has cut the original asking price to £20K less than similar properties have sold for this year (these are all reasonably new builds, less than 3 years old - so all very similar condition and design as these estates tend to be).

The point here is, a generally level headed person has lost confidence in the market, the reasons why this has happened are largely irrelevant, this has been highlighted by the recent events of the Northern Rock.

In general many people seem to think there has to be a reason for a change in market performance, that reason can actually be a change in sentiment, in fact sentiment will do more damage to any market than interest rates, slack lending, inflation, greed, BTL or anything else you care to mention.

Humans by their very nature are rather irrational, we all know that the Northern Rock is in no more trouble than Barclay's, but for some reason the average Joe in the street (helped ably by our wonderful media) has come to the conclusion that it's no longer safe to leave their money where it is. GO figure......

dannyboycey

pickles110564 wrote: »

Magic all you STR's have got it wrong just like i said before, your wishful thinking and talking up a crash and worrying everyone has gone tits up

Despite the fact that you are wrong, why would you take pleasure in someone elses financial problems? Very twisted indeed.

dannyboycey

m00m00 wrote: »

all today has done is put a little bit more air in the bubble, so it will have a bigger bang when it's popped. Popped it will be at some point.

If the BOE follows suit and reduces rates, in addition to a house price crash, we will have a recession too. This is a short term solution that will exacerbate the underlying problems further down the line.

BobProperty

Alan_M wrote: »

....we all know that the Northern Rock is in no more trouble than Barclay's......

Oh yes they are!
Northern Rock's exposure "loans to assets" are much greater than Barclay's. Northern Rock could never have given out the number of mortgages it has if it had stayed a mutual BS, it could only issue the numbers it did by borrowing on the money markets by whatever methods it used. The problem is that the instruments they used are now virtually "unsellable" as the US market has been badly hit by failures in the loans market, especially the "sub-prime" market. The difficulty there is that no one really knows (or is prepared to admit) how much "poor quality" "paper" they are carrying. So far over 100 lenders in the US have either gone out of business or have had to seriously alter their businesses because of what has happened. See Aaron Krowne's (?)
mortgage implode-o-meter, http://ml-implode.com/

WTF?_2

pickles110564 wrote: »

Magic all you STR's have got it wrong just like i said before, your wishful thinking and talking up a crash and worrying everyone has gone tits up

So house prices are going to keep on rising and rising then?

How is that going to work - people by and large aren't being paid any more and prices have already reached the limit of affordability.

All interest rate cuts are going to do is maybe boost short term confidence in borrowing large amounts of money (and boost the stock markets) but as another poster said, that's just inflating the bubble a little bit more making the inevitable pop all the bigger.

The economy needs higher interest rates for long term growth and stability. Instead, because some banks and institutions have played fast and loose in the rush to make themselves richer we are seeing the state step in to bail these risk-taking cretins out now that it has gone wrong for them.

That's at the expense of long term economic needs - we'll now certainly see higher inflation than otherwise and inflation acts like an insidious tax on everyone, especially those stupid enough to have savings instead of being good little sheep and borrowing massive amounts to fuel consumer spending.

'Free market' - what a load of tosh! It's free on the way up but time for a bit of socialist style state interference when it's coming down and the big boys stand to lose some of the money they've got from their years of unregulated noses in the trough.

CB1979_2

don't quite see how "the state has stepped in to bail them out", all they've done is assure people that their savings are covered, cos the idiots don't understand that, despite being told numerous times that it's all fine and just a temporary cashflow problem, hence why they went to their bank and got an overdraft just like any other business would do.

Alan_M_2

BobProperty wrote: »

Oh yes they are!
Northern Rock's exposure "loans to assets" are much greater than Barclay's. Northern Rock could never have given out the number of mortgages it has if it had stayed a mutual BS, it could only issue the numbers it did by borrowing on the money markets by whatever methods it used. The problem is that the instruments they used are now virtually "unsellable" as the US market has been badly hit by failures in the loans market, especially the "sub-prime" market. The difficulty there is that no one really knows (or is prepared to admit) how much "poor quality" "paper" they are carrying. So far over 100 lenders in the US have either gone out of business or have had to seriously alter their businesses because of what has happened. See Aaron Krowne's (?)
mortgage implode-o-meter, http://ml-implode.com/

The very same day NR went to the Bank of England for terms, Barclays also went to the ECB, the difference being Barclays needed more money.

They were sharp enough to understand approaching the Bank of England would be a public relations nightmare, NR weren't.

Loans by the ECB whilst the information is freely available to those who are interested simply don't seem to get the same media exposure. I have no idea why this is.

The chances of NR imploding are actually zero, worst case scenario is their share price drops to a level that they're so ripe for takeover that banks would be queuing up to buy them.

The companies in America that have imploded have been providing loans and mortgages to Mr & Mrs Trailer trash at rates of 1% on fixed two year deals, the repayments of which have been 100% of Mr & Mrs trailer Trash's disposable income. When the fixed rate ends the payments quadruple and said Trailer Trash can't make the payments and can't work out why they can't make the payments.

NR haven't been doing this, they haven't really been issuing sub prime loans in the true meaning of the phrase, they have been pursuing borderline business, which for some reason we in the UK now consider sub prime. It's simply not the same meaning.

All these sub prime 1% deals have been repackaged and effectively laundered by the like of Goldmans and Morgan Stanley, then sold on to Barclays and some of the larger UK banks. I'd say they were every bit as exposed as NR if not more.

BobProperty

Alan_M wrote: »

The very same day NR went to the Bank of England for terms, Barclays also went to the ECB, the difference being Barclays needed more money.....

Barclays was a normal "end-of-day" balancing loan IIRC (it's a clearing bank) not what NR was asking for/being offered. It's the difference between using your overdraft and needing a loan to get you out of a fix.