Reply to: House Prices

[AtW]

And I suspect that Northern Rock was only taken on because nationalising a bank has been a lifelong dream of Brown's.

Rubbish - he never wanted it to happen because it was sooo Old Labour.

[expat]

Our authorities have been totally inept so far. The USA FED were aiding the money markets in June last year and we did not start until after the run on Northern Rock.

And I suspect that Northern Rock was only taken on because nationalising a bank has been a lifelong dream of Brown's.

[AtW]

When I refer to 'loans being called' I mainly mean the loans to Northern Rock from the Bank of England. The government are trying to reduce the mortgage book from 100 Billion pounds to 50 Billion approx. The net affect of this is to take 50 Billion of liquidity out of the system.
Atw, you do yourself no favours in the credibility stakes by resorting to abuse which I notice you also did to the poster Mailman. Just because other people's opinions may be different to yours, does not always make them wrong. Please try to keep on the subject rather than behaving like a child throwing its toys out of the pram.

Well, I don't think you really have a clue when you suggest that Govt should just "print" money, this is not a matter of abuse - it is just the only logical conclusion that anyone who studied macroeconomics can make seeing person suggesting to "print money".

The Govt has no choice - it dumped lots of money into NR and now has to get it back, the only way to do it is to push people with morgages elsewhere, this is effectively selling NR in small parts while only selling good small parts (those that get morgage in another bank).

If the Govt does not do it, then there are rules about states aid in the EU, and more importantly UKs national debt increases sharply - this will affect further borrowing and rates at which UK can borrow, this can be very expensive as UK Govt is in debt already, so the only sensible way is to shut down NR in small parts like they do now, and put more money into liquidity by offering extra loans to UK banks, something that BoE is already doing anyway.

[chubba]

We have been screwed over by the greed of the banks they have gambled with our futures.

Did you buy your place in the hope of making a profit or because you saw that the housing market was well balanced and city-centre flats were a bargain? Most of the people facing negative equity have been screwed over by their own greed and stupidity, the banks just helped you on your way

[HRH]

We have been screwed over by the greed of the banks they have gambled with our futures.

[PAH]

If houseprices are going to nose-dive, the less of our money tied up in over-inflated mortgages, that they'll make a loss on if people start defaulting, the better.

[Cyberman]

Loans won't be called. Suckers who overextended themselves in the last 2-3 years will have to pay a lot higher interest - when they took out their 2 years fixed 4.5-5.0% deal thinking: "oh I'd just switch to another morgage provider so I won't be hit by higher variable rate" will now be stuffed because they won't get morgage elsewhere, they will have to pay up more and will either do that by cutting expenses (going out for a meal, new plasma TV etc) or lose their house - there is no other alternative that would not lead to hyperinflation.

Sorry Cyberman but I really think you got no clue in macroeconomics, but don't you worry - you are not the only one on this board, and especially on this God forsaken planet

When I refer to 'loans being called' I mainly mean the loans to Northern Rock from the Bank of England. The government are trying to reduce the mortgage book from 100 Billion pounds to 50 Billion approx. The net affect of this is to take 50 Billion of liquidity out of the system.
Atw, you do yourself no favours in the credibility stakes by resorting to abuse which I notice you also did to the poster Mailman. Just because other people's opinions may be different to yours, does not always make them wrong. Please try to keep on the subject rather than behaving like a child throwing its toys out of the pram.

[AtW]

But that is part of the problem as I have already stated on another thread. Calling in loans is not the way to handle a liquidity crisis. The government should be adding liquidity to the system but instead they take it out. Nothing surprises me any more with New Lie.

Loans won't be called. Suckers who overextended themselves in the last 2-3 years will have to pay a lot higher interest - when they took out their 2 years fixed 4.5-5.0% deal thinking: "oh I'd just switch to another morgage provider so I won't be hit by higher variable rate" will now be stuffed because they won't get morgage elsewhere, they will have to pay up more and will either do that by cutting expenses (going out for a meal, new plasma TV etc) or lose their house - there is no other alternative that would not lead to hyperinflation.

Sorry Cyberman but I really think you got no clue in macroeconomics, but don't you worry - you are not the only one on this board, and especially on this God forsaken planet

[Cyberman]

Just in case you did not notice Northern Rock will have to be scaled down to return that money - central bank can't just give anyone lots of money, when you do you get hyperinflation like in Zimbabwe or in Russia in the 90s - they were also printing money there. I think you need to learn a bit about macroeconomics and monetary policies.

But that is part of the problem as I have already stated on another thread. Calling in loans is not the way to handle a liquidity crisis. The government should be adding liquidity to the system but instead they take it out. Nothing surprises me any more with New Lie.

[AtW]

The BofE would grant the funds in interest-bearing loans just as it did with Northern Rock.

Just in case you did not notice Northern Rock will have to be scaled down to return that money - central bank can't just give anyone lots of money, when you do you get hyperinflation like in Zimbabwe or in Russia in the 90s - they were also printing money there. I think you need to learn a bit about macroeconomics and monetary policies.

[Cyberman]

Yes, and this will lead to hyperinflation like Zimbabwe, you are therefore Mugabe
: "But economists say that the prime cause of inflation is the government's huge budget deficit, which it deals with by printing more money."

BoE can't and won't print enough money to give anyone a morgage with small interest rate when assets are priced so highly, something like this has already been happening in the lext 3-5 years, which has lead to the bubble reaching current levels - there is no longer anymoney left to keep the bubble going, if you print more money then the bubble will go a bit longer but it will also affect other things like food, fuel etc - it will be like in Zimbabwe. You are truly Mugabe, so I claim my 5000000000000 Zimbabwean dollars.

Your view is totally extreme Atw.
The BofE would grant the funds in interest-bearing loans just as it did with Northern Rock.
Once confidence has returned and banks are lending to eachother again and LIBOR is back to normal, those loans can be recalled thus reversing the inflationary pressure.

[AtW]

The BofE can create any amount of money as all it has to do is print more

Yes, and this will lead to hyperinflation like Zimbabwe, you are therefore Mugabe
: "But economists say that the prime cause of inflation is the government's huge budget deficit, which it deals with by printing more money."

BoE can't and won't print enough money to give anyone a morgage with small interest rate when assets are priced so highly, something like this has already been happening in the lext 3-5 years, which has lead to the bubble reaching current levels - there is no longer anymoney left to keep the bubble going, if you print more money then the bubble will go a bit longer but it will also affect other things like food, fuel etc - it will be like in Zimbabwe. You are truly Mugabe, so I claim my 5000000000000 Zimbabwean dollars.

[Cyberman]

How much is enough in your view? BoE can't provide morgages for everyone to buy houses at ridiculous prices and pay 3-4% morgage, it's not going to happen and BoE has not got that much money anyway - it would be insane to throw more good money after bad ones.

Sure FSA, Gov and BoE was caught sleeping - but there is not a lot they can do now, they could have avoided this pitfall by ensuring no excessive lending
is going on, but Nu Liebour actively encouraged it, I guess from now on they won't be mentioning record low morgage rates though

The BofE can create any amount of money as all it has to do is print more, but the downside is that increasing the money supply will create more inflation. The fact is that they have been far too frugal so far and are putting inflation ahead of other factors.
It is not just a case of mortgages, but also many other types of borrowing. The real problems will come once banks start reducing or even calling in business overdrafts and then unemployment will start to rise. As to the amount required, it could be as much as 100 Billion, but this could be later paid back as conditions improve, so it is not quite as bad as it sounds.

[AtW]

I agree that the BofE has put some money into the markets, but so far not enough

How much is enough in your view? BoE can't provide morgages for everyone to buy houses at ridiculous prices and pay 3-4% morgage, it's not going to happen and BoE has not got that much money anyway - it would be insane to throw more good money after bad ones.

Sure FSA, Gov and BoE was caught sleeping - but there is not a lot they can do now, they could have avoided this pitfall by ensuring no excessive lending
is going on, but Nu Liebour actively encouraged it, I guess from now on they won't be mentioning record low morgage rates though

[Cyberman]

They have already done so. The fundamental issue is that property is very much overinflated, so its value is going down and there was a lot of junk paper issued with the property as collateral - this paper is sold many times and highly leveraged, so any drop in property prices (and such drops are inevitable because prices already reached ridiculous level and no cheap morgages will be available) leads to reduction in value of those junk papers, so in turn banks have to show losses on it and in order to keep up with capital requirements they have sell some other things to get some cash, so this depresses market further and results in drops of value of those other assets. Frankly, is there an asset that was not overinflated in the last 10 years? The only one I can think of is modesty (as in not greed).

I agree that the BofE has put some money into the markets, but so far not enough, even after pressure from the banks, and that is my point. I'm talking about a much greater sum until we see some improvement in LIBOR.
Our authorities have been totally inept so far. The USA FED were aiding the money markets in June last year and we did not start until after the run on Nortern Rock. The BofE should have been far more proactive but I am sorry to say that they, the FSA and the government have been caught asleep on the watch.