We're Boomed!

[IDB]

I think a crash will come, but not to the extent of the last. There are more people I know that have been made redundant in the last 12 or so months than since the last economic crash. All of them have been in service the service or manufacturing industries. Redundancies are usually "one of the signs" before a crash in most economies.

If redundancies continue, then people will be flogging off houses/downsizing rather than getting themselves into positions where they can't afford the mortgage. This will increase supply and prices will surely have to drop a little at least?

[donaldduke]

Money supply expansion in the UK and the rest of the world is running at well over 10% a year.

Mortgages are free money while this happening.

You pay 5% interest, but your debt depreciates at 12%.

The 2% CPI stats are a smoke screen designed to keep wages down.

[milanbenes]

Donald,

don't tell everyone the secret !

hmmmm

we are all agreed that the expansion of the availability of credit is one of the biggest fuels behind the rising prices

what would happen if banks turned off the credit taps ? ala 1929 ?

oh dear,


anywayz, as we all know from previous experience, short term ups and downs, negative equity in the mid 90's, home ownership is always a winner in the long term

Milan.

[BrilloPad]

what would happen if banks turned off the credit taps ? ala 1929 ?

Milan.

IMO This is a very good point. Although the credit taps will not go volunterarily by the banks, they might be forced. Using Credit instruments, a default of £1 can cost £10(like the piper alpha spiral). This nearly happened with LTCM in 1998 - these days the central banks control less than the Gnomes of Zurich speech by Wilson(1967?).

At the moment only an influx of financial people to London from NY is keeping things going up - London dragging up rest of country. Collapse of a hedge fund could see this supply turned off.

Add both events together and we could see fireworks...

[milanbenes]

'spose equally damaging would would be reduce supply of credit, and increase interest rates for those with credit I guess the two go hand in hand because if the banks are reducing the eligibility for new credit then they need to compensate the loss of revenue by increasing interest rates for those already locked into credit

wonder what the housing market would do in that situation ?

anyway I don't know nuffin about all this stuff so ignore what I say and do your own research all the best,

Milan.

[andy]

Not only in the UK there is lot of credit available in most of the countries. I wonder where all this low interest money is coming from .

[milanbenes]

andy,

disagree, on the European mainland access to credit is much stricter and rightly so.

I think only the UK and the US are up there leading the way in terms of availability of money.

Where does it all come from ? Now that's a good question, which will be answered another time.

Remember folks do your own research and do not take financial advice from bulletin boards and internet forums,

all the best,

Milan.

[Bright Spark]

good discussion today on bbc website about this

http://news.bbc.co.uk/1/hi/business/6549299.stm

[wendigo100]

I think a crash will come, but not to the extent of the last.

Well let's hope you are right, but more people are overstretched, and by a lot more money, than the last time.

What's even worse is that people have less money to save, so depend on their homes to provide them with a pension.

[Hart-floot]

What's even worse is that people have less money to save, so depend on their homes to provide them with a pension.

One of the differences in this current property bubble, when compared to the one in the late 1980's, has been the demand for BTL by people using it as a pension due to the collapse of private sector final-salary pension schemes etc. BTL's target the same property that 1st time buyers go for hence less property available for 1st timers but more available to rent .

One of the unintended (?!!?) consequences of Gordon Browns pension tax reform made in 1997. Hope all you 1st time buyers appreciate this come election day lol