Matteeboy

Anyone see newsnight? Talking about taking interest to zero and then using "quantitative easing" which basically means printing money.

That'll do our weak pound a lot of good. Not.

We are all dooooomed.

fatscoobfella1

iTrader: (1)

Yes lets..

Pete,s got all the money anyway..

Us Northerners are at the skint end of the country

SunnySideUp

My relatives are Northerners and have more money than me!!!

nixxon

Squeak, squeak!
A bit of inflation will work wonders. Mortgage payments will seem like pocket money in a couple of years!

SunnySideUp

We are looking at DEFLATION ........ if anything.

What would THAT make the mortgage payments look like then?

nixxon

Not if they increase the money supply, we're not!

Deep Singh

Not sure if we are looking at deflation, I think usa and UK are looking to inflate their way out of this crisis

FlightMan

Can someone explain to me what " inflate this way out of this crisis " means?

I always understood inflation was bad, well inflation beyond the Govt 2% figure anyway

So, how can we inflate our way out of this mess?

rob878

Didn't Sweden have rampant inflation in the 70's? If i remember correctly, and i'm more than likely wrong. rather than trying to curb it, they fueled it.

They did however ensure that the products (cars etc) that they were selling abroad at the time, where of significant quality to justify the premium price, caused by the inflation.

The inflation ran it's course, and adjusted to a higher level than it started. Which if i've got this right is why holidaying over there is always so damn expensive.

Additionally i think it happened about the same time as the 70's energy crisis.

SunnySideUp

We had rampant inflation in the 70's too!!

And under the Tories and Maggie we had 14% Bank Base Rates in 1979/1980 - 12.5% more than they are now!

Deep Singh

I'll try, its a concept I've read about but have to admit I have difficulty grasping so go easy on me.

We are a country with huge personal debt. We print loads of paper money and so fuel inflation. As an extreme example lets say the average mortgage debt is £100k but inflation has allowed the average wage to become £100k/year and a loaf of bread costs £50.
The £100k you owe on your house now becomes relatively small so in a way the debt is reduced, its bull**** but economists talk about it

GC8

Yes: she was saving us from the inept Labor buffoons who had bancrupt the country though, wasnt she troll?

Leslie

What happened under the Callaghan government, and what did the IMF say to him? And what happened during the Wilson government?

Les

FlightMan

Cheers Deep!

So, if ( and I'm talking hypothetically here ) my mortgage is 100k, and my salary is 100k, as you say the mortgage debt is small. And surely house values will be enormously high, £500k for an average property?

But if a loaf of bread is £50, my living expenses will be circa 1k per week, so how does that make anyone any better off?

It's all financial mumbo jumbo bullsh1t isn't it. I truly believe we're screwed.

Henrik

iTrader: (5)

It means you'd spend less of your disposable salary paying off the debt, which means you'd be able to spend more at other things.

I think of it as ratios, not absolute numbers. E.g. say I had a mortgage (on a fixed interest etc etc so I had fixed payments) and there was lots of inflation of a number of years.

Example figures for year 0:

Net salary: 3000 pcm
Mortgage + other debt: 1000pcm
debt/salary ratio: 1/3

Add inflation at 10% per year, assuming your wages keep up.

year 5:
Net salary: 4831 pcm
Mortgage+debt: 1000pcm
debt/salary ratio: 1/5

Of course, other stuff will have gone up in price, but essentially you spend less of your salary servicing debt.


The above scenario is really good for debtors, but sucks donkey ***** for anyone who has savings in the bank, as the interest rate you get will probably be less than inflation (this is what's happening now for example), meaning you actually lose purchasing power (your savings at year 0 will buy more stuff than your savings at year 5).

unclebuck

Great for savers. We could do with 'Maggie' now.

john banks

The threat of deflation is now so much talked about, I'm far more concerned now about positioning myself to protect against medium term inflation. We are not going into this like Japan who were a nation of savers, we are a nation of debtors.

If I was in the US, I'd be looking at buying housing this year. As it is, I think stocks and commodities will recover well before UK housing. So I'm planning on moving back into gold & oil, oil companies, miners, pharms, corporate bonds soon. I think we've got another 15% to come off UK house prices even if we have to worry about inflation again soon, more like 40% if we do deflate.

I'm not worried about interest on savings, I'm worried about preserving the spending power of those savings after inflation, presently we still have negative real interest rates. Quantitative easing would be effectively devaluing my savings, I'll be getting out of sterling very fast is that starts to happen.

Petem95

Housing crash creates tax black hole | Politics | The Observer

Apparently Brown is set to lose £15bn in tax receipts due to the house price crash - this will no doubt result in a stealth tax frenzy

Sounds like expectations of a futher 20% fall in house prices in 2009 is now fairly mainstream now as well.

f1_fan

iTrader: (9)

Leaving aside your perosnal greed is there anyone on here who really thinks house prices returning to levels that people can properly afford rather than have to buy on the very edge of their credit worthiness is a bad thing for the long term good of the country?

f1_fan

iTrader: (9)

Ah the old rose tinted spectacles are a wonderful invention.

njkmrs

I have just read that Interest Rates will be likely to remain low for the rest of this year ,with still a chance of another reduction to 1% or even .5% !!!!!


Overpay ,overpay ,overpay if you can .!!!

fatscoobfella1

iTrader: (1)

^^^^^^^^^^^^^^^^^^^^

Great for some,but not if your in a fixed rate..

All the "experts" said you would be daft NOT to get into a fixed rate 12 months ago..So a lot of people jumped and are now in for 2 years+ at 5%-6%.

"Experts".........Ive **** em..

Deep Singh

Hi John.

1)When you say you would get out of sterling, how exactly would you do that?

2) Would you gain exposure to oil via an ETF? If so priced in $ or £?

Thanks

njkmrs

To be fair ,I dont think many of the experts predicted a downturn like this one .Even though it is their job to have a fairly accurate idea of how things are going to go .!

It is a bit of a gamble to be honest and you have to go with what your comfortable with .You can make your payments and know what you will have left over for other things ,which is not a bad thing IMO .

Others gambled and it works for them ,but the tide can turn ,so its all ifs and buts dependending on your circumstances .

fatscoobfella1

iTrader: (1)

Oh yea..

I quite agree,but everyone in the media etc was spouting the 15% interest rates like the last time the country went into meltdown,scaring people to death..But hey,thats the media i guess..

If people get into trouble,especially with mortgage payments i have no sympathy at all..
Why gamble with your home ???

john banks

1. Withdraw sterling and buy anything else that I don't think will get trashed. I don't have any foreign currency accounts, with banking instability I think it is a bit risky not being under FSCS which is bailing out my Icesave holdings already. However, I could quickly and easily buy shares, bonds, commodities through stockbrokers.

2. Yes, priced in $ but the conversion is done when you buy/sell. All I'm worried about is the price in £.

SunnySideUp

Back on the topic of the house market ......

Just been down on the South Coast, looked at a few properties, the Agents report a massive upturn in viewings and enquiries ..... yes, I know that Estate Agents are second only to Car Dealers in talking bullsh*t - but, it did seem very busy in the Agents premises and indeed more people than me viewing places at the same time!!

Could it be the turning point? Maybe .... certainly no point keeping money in the bank anymore.

FlightMan

Viewings and enquiries? Hardly a cue to jump back in. Look at mortgage futures, mortgage lending etc. The house market is on it's knees and will be for 2/3 years.

Lenders aren't PRICING IN falls, they are actively trying to CREATE falls so they can lend at sensible levels.

300k flat, person paying 3% interest on mortgage = not bad deal for the bank? until the person loses their job and can`t pay back, now the bank have to repo because that is the only big stick they posses to get people to stick to their repayment schedule? The problem for the bank is that the asset is plumeting in value.

Fast forward - base rates at 7%, flats, good ones, 100k. 100k flat, person paying 9% interest on mortgage = not bad deal for the bank?

Ramping the market with cheap mortgage deals only worked for the banks when they were getting shot of the risk almost immediately through securitization? Now that is gone what most benefits the banks? - IMO a stabilized housing market where the bank can easily re-coup their loan if they have to reposess, in other words, a massive crash is beneficial to the banks.
In their three step plan they will 1/ Get as much taxpayers money as possible to shore up their balance sheets 2/ Co-operate in the setting up of a " Toxic Bank" to get rid of all their bad loans, and 3/ Crash the market by refusing to loan the silly money needed to buy at todays prices so they can get back to lending in a less risky manner.

I`m not saying this is all straighforward, there might be too much toxic stuff, there might be some banks that have to go down, who knows, but the ONLY outcome which helps the banks now is one Muthaf*cker of a crash. The people bleating that "Gordon will re-inflate house prices" are deluded. The main players now need a crash, and a crash there will be, I`m talking 1997 prices.

SunnySideUp

I'm hoping for a crash .... as rising prices are bad for me when buying without selling!!

However, I did sense a lot of activity today in the market - now, of course, these viewers need to be turned into buyers or it's still going down.

If buyers start coming back, we have seen the bottom IMO ...... I don't want it to be, but I think it may take off this Spring/Summer?

FlightMan

Pete, we're in a crash. 16% down yoy remember!

Don't let a few people browsing an EA offices tell you otherwise.