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It`s different this time
Pobby
Posts: 5,438 Forumite
Different, yes indeed. I remember with alarm, watching the first rapid move of hpc at the turn of the millenium. Thinking, being older, this is a bit crazy. There didn`t seem to be any wage inflation which of course powered up the hpi in the 80`s. A few years later I was gobsmacked. My own house was hitting a price increase of 300% over the price we paid for it in 1998.
Naturally I enquired why this is happening. Ah, it`s different this time they replied, we are in a time of low interest rates. Well you would have to be I thought, the time of cheap money. I asked how how Billy Minimum Wage had a new Audi outside his house. Ah they said, he mewed. You see, they told me, he was earning an extra £300 a week because that was the amount the price of his house was increasing.
Then I, being very niave, asked how come that couple down the road have bought their house for £150k when they both earn minimum wage. I was enlightened when they told me that they had a 125%, no money down, fixed cap rate, stand on your head, knees up mother brown 8 times loan to value deal. But don`t worry, it`s different this time.
Well what fun the lenders must have had. They took the loans, put them in pretty paper and then played pass the parcel. Then mid last year, the music stopped and they got to unwrap the parcels. Oh dear they cried, we havn`t got anything in them bar lot`s of iou`s that will never get paid.
One was so upset that a large Scottish person had to give them lot`s of money to keep them going. They had been very generous with the money they had lent and were very worried that the nice people they had lent it to were going to have a problem paying it back.
Just as this was happening, lot`s of people who lived far, far away suddenly thought, we want more to eat and would like to have more energy. Oh dear, all those people who had ``earnt`` lots of money out of their houses had bought things made by those people from far off lands found that they stopped having the extra income from their houses. They had to pay more for food and petrol , gas and electricity.
The now even bigger, but with a grumpy face, Scottish person said don`t worry, the economy is robust, I will drop interest rates, but the generous lenders asked for more repayments. It`s different this time.
To be continued!
Naturally I enquired why this is happening. Ah, it`s different this time they replied, we are in a time of low interest rates. Well you would have to be I thought, the time of cheap money. I asked how how Billy Minimum Wage had a new Audi outside his house. Ah they said, he mewed. You see, they told me, he was earning an extra £300 a week because that was the amount the price of his house was increasing.
Then I, being very niave, asked how come that couple down the road have bought their house for £150k when they both earn minimum wage. I was enlightened when they told me that they had a 125%, no money down, fixed cap rate, stand on your head, knees up mother brown 8 times loan to value deal. But don`t worry, it`s different this time.
Well what fun the lenders must have had. They took the loans, put them in pretty paper and then played pass the parcel. Then mid last year, the music stopped and they got to unwrap the parcels. Oh dear they cried, we havn`t got anything in them bar lot`s of iou`s that will never get paid.
One was so upset that a large Scottish person had to give them lot`s of money to keep them going. They had been very generous with the money they had lent and were very worried that the nice people they had lent it to were going to have a problem paying it back.
Just as this was happening, lot`s of people who lived far, far away suddenly thought, we want more to eat and would like to have more energy. Oh dear, all those people who had ``earnt`` lots of money out of their houses had bought things made by those people from far off lands found that they stopped having the extra income from their houses. They had to pay more for food and petrol , gas and electricity.
The now even bigger, but with a grumpy face, Scottish person said don`t worry, the economy is robust, I will drop interest rates, but the generous lenders asked for more repayments. It`s different this time.
To be continued!
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Comments
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You know you're bonkers, don't you.
It's all that fresh sea air and garam masala.0 -
The existence of the internet this time around makes information on what is happening (and why) much easier to come by, for anyone minded to look for it.
That could lead to a very big difference in the perception of this crash and the last.
As you note, a lot of very nasty things are all happening just at the worst possible time as the UK housing market is coming off the boil.
However, many of these nasty things are directly related to the madness of the Western housing/credit bubble (it hit nearly every 'Western' country) of which the UK was an enthusiastic part. The credit crunch is a direct result of the US house price crash. The current oil/food bubbles are a direct result of the central bank 'funny money' bailouts of the financial system in the wake of the credit crunch.
If you want to look deeper, the housing/credit bubble itself was a product of the response to the dotcom bubble bursting.
Basically, we have had almost a decade of the central banks pumping the system and inflating one disastrous bubble after another. Now we're getting close to the endgame.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
This is very true. In the last crash, no internet, no 24 hour TV, no property !!!!!! programmes telling you it was going up, up, up.The existence of the internet this time around makes information on what is happening (and why) much easier to come by, for anyone minded to look for it.
That could lead to a very big difference in the perception of this crash and the last.
If you were worried, you'd have easily been talked out of your negativity by all your family/friends telling you it was GREAT you were buying.
Most posters coming on here have been researching things online and they come in to get opinions to see if others think it's a bad move. And they find hundreds of others that do think it's a bad move.
Nobody these days is home alone, unable to talk through options. Now they can simply come online, discuss ideas and come to a well-rounded decision of their own.0 -
Ya dead right PN. Plus all the hours I spend f`rting around on here due to the lack of business I am doing. I mean, it`s getting to the point where I might be better off stacking super market shelves!0
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PN. I am a self employed technical sales agent. I am highly skilled in what I do (more years doing it than I can remember). The problem I face is that it is entertainment based and therefor very vunerable to downturns.0
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... technical ... sales ... entertainment.PN. I am a self employed technical sales agent. I am highly skilled in what I do (more years doing it than I can remember). The problem I face is that it is entertainment based and therefor very vunerable to downturns.
Do you flog/rent out big screens to pubs/similar then?0 -
Basically, we have had almost a decade of the central banks pumping the system and inflating one disastrous bubble after another.
Very true, we are now going to suffer retrospective inflation. Some of this inflation of course is speculation but the majority is substantive. We now require more oil than is produced (famous long awaited peak oil scenario) and we are suffering more unpredictable weather effecting detrimentally the giant international food producing areas.
Alan Greenspan is ever looking the financial Donkey rather than the financial Guru he use to be known for. All he has down is delayed a number of moderate downturns with a series of cheap credit assett bubles (land, property, outragously overvalued firm firm buyouts) to make a international giant downturn. It was going to bite us eventually.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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PN , I do that kind of stuff but very diverse. Thankfully i have no capital tied up in it. Somewhat different to a few years ago.0
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Excellent thread, well done. Brilliant read!0
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