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Finances / Finanzen » uk.finance » Rising house prices fuel "dangerous" debt levels
Rising house prices fuel "dangerous" debt levels [message #379935] Di, 11 April 2006 11:24
Crowley  
The debt is starting to bite as I told you it would ;-)
.....................

Rising house prices fuel "dangerous" debt levels
Tue Apr 11, 2006 8:09 AM BST

http://investing.reuters.co.uk/news/newsArticle.aspx?type=pr opertyNews&storyID=2006-04-11T070901Z_01_NOA125491_RTRUK OC_0_CITYWIRE-LORNA-HOUSE-PRICES.xml


By Lorna Bourke

LONDON (Citywire) - A slew of property data has highlighted the growing
strain that the resurgent housing market is placing on first-time
buyers and the wider economy.

One in 10 first-time buyers now use a bank loan or credit card to fund
a typical deposit of 15,000 pounds, according to smartnewhomes.com, a
property website. A fifth are resorting to a 100 percent mortgage with
no deposit as the annual rate of house price inflation measured by
Halifax more than doubled to 6.2 percent in the last quarter of 2005.

David Bexon, managing director of smartnewhomes.com, said: "New buyers
now make up less than 25 percent of the market, having been edged out
by spiralling house prices and limited supply of appropriate
properties. The levels of debt that first-time buyers now have to take
on to buy a home is dangerous."

Existing homeowners are also sinking into debt. Bank of England figures
also released last week show that the level of mortgage equity
withdrawn by homeowners surged to 11.8 billion pounds in the fourth
quarter of last year, up from the average of 8.2 billion pounds over
the previous four quarters. This is equivalent to 5.6 percent of
post-tax household income.

Jim Cunningham, senior economist at the Council of Mortgage Lenders,
said this was a "significant pick-up" from the average 4 percent
quarterly level in the previous 12 months. He noted that real
disposable income had been flat in the fourth quarter and that
close-to-trend real spending growth had only been financed by a
reduction in saving and an increase in mortgage equity
withdrawal.............................
Re: Rising house prices fuel "dangerous" debt levels [message #379937 ] Di, 11 April 2006 11:43
Tumbleweed  
"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> The debt is starting to bite as I told you it would ;-)
> ....................
>
> Rising house prices fuel "dangerous" debt levels
> Tue Apr 11, 2006 8:09 AM BST
>

Make your mind up. So now you agree that house prices _are_ rising?
I'll put the gas on under the tar, it takes a while to warm up :-)

p.s. Awesome result against the Hammers. Win against Bolton and its all over
bar the shouting, but in any case it will be much tighter next season.

--
Tumbleweed

email replies not necessary but to contact use;
tumbleweednews at hotmail dot com
Re: Rising house prices fuel "dangerous" debt levels [message #379942 ] Di, 11 April 2006 12:06
Skyes  
"Tumbleweed" <thisaccountneverread [at] yahoo.com> wrote in message
news:4a1bs1Fqpe7qU1 [at] individual.net...

> p.s. Awesome result against the Hammers. Win against Bolton and its all
> over bar the shouting

Not even slightly nervous? ;)

---
Sam
Re: Rising house prices fuel "dangerous" debt levels [message #379943 ] Di, 11 April 2006 12:32
Crowley  
Tumbleweed wrote:
> "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> > The debt is starting to bite as I told you it would ;-)
> > ....................
> >
> > Rising house prices fuel "dangerous" debt levels
> > Tue Apr 11, 2006 8:09 AM BST
> >
>
> Make your mind up. So now you agree that house prices _are_ rising?
> I'll put the gas on under the tar, it takes a while to warm up :-)

Don't be so hasty ! I've got another nine months :-)

> p.s. Awesome result against the Hammers. Win against Bolton and its all over
> bar the shouting, but in any case it will be much tighter next season.

I don't know about a win against Bolton though they are off the boil at
the moment, anyway you've got it in the bag, we've left it too late but
we'll give you a run for your money next season.

I suspect Arsenal will be back challenging aswell :-( though if they
lose Henry who knows ?
Re: Rising house prices fuel "dangerous" debt levels [message #379944 ] Di, 11 April 2006 12:58
Tumbleweed  
"Sam Smith" <nospam [at] nospam.com> wrote in message
news:e1fv3f$ql8$1$8300dec7 [at] news.demon.co.uk...
> "Tumbleweed" <thisaccountneverread [at] yahoo.com> wrote in message
> news:4a1bs1Fqpe7qU1 [at] individual.net...
>
>> p.s. Awesome result against the Hammers. Win against Bolton and its all
>> over bar the shouting
>
> Not even slightly nervous? ;)
>

Now only 'slightly', as opposed to 'very', after 20 minutes into the game on
Sunday :-)

--
Tumbleweed

email replies not necessary but to contact use;
tumbleweednews at hotmail dot com
Re: Rising house prices fuel "dangerous" debt levels [message #379945 ] Di, 11 April 2006 13:00
Tumbleweed  
"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
news:1144751575.681423.96220 [at] u72g2000cwu.googlegroups.com...

>
> I don't know about a win against Bolton though they are off the boil at
> the moment, anyway you've got it in the bag, we've left it too late but
> we'll give you a run for your money next season.
>
> I suspect Arsenal will be back challenging aswell :-( though if they
> lose Henry who knows ?
>
Yep, the Arse without henry doesnt seem right somehow, would be interesting
if there was an analysis of their results with and without him. But they do
seem to be on the way back, plus the (irritating) scousers. Should be a much
closer race all round next season.

--
Tumbleweed

email replies not necessary but to contact use;
tumbleweednews at hotmail dot com
Re: Rising house prices fuel "dangerous" debt levels [message #379948 ] Di, 11 April 2006 13:09
chris  
"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> The debt is starting to bite as I told you it would ;-)

I thought you said house prices would crash, now you say they are on the up.
Re: Rising house prices fuel "dangerous" debt levels [message #379949 ] Di, 11 April 2006 13:20
Chris X  
"Chris.S" <Chris [at] postmaster.co.uk> wrote in message
news:443b8eab$0$9237$ed2619ec [at] ptn-nntp-reader01.plus.net...
>
> "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>> The debt is starting to bite as I told you it would ;-)
>
> I thought you said house prices would crash, now you say they are on the
> up.

As Crowley rightly said, he still has another nine months ! Do try and keep
up with the adults, Slimey. Take your nebuliser and have a lie down, come
back when you're feeling a bit "fresher" !
Re: Rising house prices fuel "dangerous" debt levels [message #379951 ] Di, 11 April 2006 13:27
Crowley  
Chris.S wrote:
> "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> > The debt is starting to bite as I told you it would ;-)
>
> I thought you said house prices would crash, now you say they are on the up.

Try to pay attention Slimey. The point is house prices have achieved
such ridiculous levels that many buyers are having to take on crippling
levels of debt to obtain one.

It's a bubble ripe for bursting and as easy money dries up (see other
thread) watch it go pop with a vengeance.
Re: Rising house prices fuel "dangerous" debt levels [message #379952 ] Di, 11 April 2006 13:36
Stephen Glynn  
Crowley wrote:
> The debt is starting to bite as I told you it would ;-)
> ....................
>
> Rising house prices fuel "dangerous" debt levels
> Tue Apr 11, 2006 8:09 AM BST
>
> http://investing.reuters.co.uk/news/newsArticle.aspx?type=pr opertyNews&storyID=2006-04-11T070901Z_01_NOA125491_RTRUK OC_0_CITYWIRE-LORNA-HOUSE-PRICES.xml
>
>
> By Lorna Bourke
>
> LONDON (Citywire) - A slew of property data has highlighted the growing
> strain that the resurgent housing market is placing on first-time
> buyers and the wider economy.
>
> One in 10 first-time buyers now use a bank loan or credit card to fund
> a typical deposit of 15,000 pounds, according to smartnewhomes.com, a
> property website. A fifth are resorting to a 100 percent mortgage with
> no deposit as the annual rate of house price inflation measured by
> Halifax more than doubled to 6.2 percent in the last quarter of 2005.
>
> David Bexon, managing director of smartnewhomes.com, said: "New buyers
> now make up less than 25 percent of the market, having been edged out
> by spiralling house prices and limited supply of appropriate
> properties. The levels of debt that first-time buyers now have to take
> on to buy a home is dangerous."
>
> Existing homeowners are also sinking into debt. Bank of England figures
> also released last week show that the level of mortgage equity
> withdrawn by homeowners surged to 11.8 billion pounds in the fourth
> quarter of last year, up from the average of 8.2 billion pounds over
> the previous four quarters. This is equivalent to 5.6 percent of
> post-tax household income.
>
> Jim Cunningham, senior economist at the Council of Mortgage Lenders,
> said this was a "significant pick-up" from the average 4 percent
> quarterly level in the previous 12 months. He noted that real
> disposable income had been flat in the fourth quarter and that
> close-to-trend real spending growth had only been financed by a
> reduction in saving and an increase in mortgage equity
> withdrawal.............................
>

I wonder how much, though, of the mortgage equity withdrawals are
because of people using the cash to pay off existing debts, thus
converting unsecured debts they've already incurred into secured ones
at a far lower rate of interest. That seems a perfectly sensible thing
for most people to do.

Steve
Re: Rising house prices fuel "dangerous" debt levels [message #379955 ] Di, 11 April 2006 13:44
Tim  
"Crowley" wrote
> ... The point is house prices have achieved such
> ridiculous levels that many buyers are having to
> take on crippling levels of debt to obtain one.

Why don't they bid-down the price,
instead of accepting even higher prices?

[Your article quoted: "...the annual rate of house
price inflation measured by Halifax more than
doubled to 6.2 percent in the last quarter of 2005".]
Re: Rising house prices fuel "dangerous" debt levels [message #379956 ] Di, 11 April 2006 14:28
Crowley  
Tim wrote:
> "Crowley" wrote
> > ... The point is house prices have achieved such
> > ridiculous levels that many buyers are having to
> > take on crippling levels of debt to obtain one.
>
> Why don't they bid-down the price,
> instead of accepting even higher prices?

Good point. We're told it's now a buyers market so why don't more
would-be buyers try harder to haggle prices down furiously rather than
saddle themselves with huge debts ? Either that or stand aside and wait
for the inevitable (IMO) correction.

Perhaps it's a "British thing" ? Many people seem to think they're
being 'cheeky' if they offer 5% off. They should spend a week training
in haggling in the casbah in Tangier.

> [Your article quoted: "...the annual rate of house
> price inflation measured by Halifax more than
> doubled to 6.2 percent in the last quarter of 2005".]

House prices are sliding again according to the ODPM report yesterday
based on selling prices :
http://www.odpm.gov.uk/index.asp?id=1002882&PressNoticeI D=2138
Re: Rising house prices fuel "dangerous" debt levels [message #379958 ] Di, 11 April 2006 14:32
Crowley  
Stephen Glynn wrote:
>
> I wonder how much, though, of the mortgage equity withdrawals are
> because of people using the cash to pay off existing debts, thus
> converting unsecured debts they've already incurred into secured ones
> at a far lower rate of interest. That seems a perfectly sensible thing
> for most people to do.

It's sensible to move to secured lower interest rate vehicles so long
as they can maintain the payments. Securing the debts against their
house however means the property is at risk if they fall behind though
I heard lenders can obtain CCJ's to secure 'unsecured debts' that fall
behind anyway.
Re: Rising house prices fuel "dangerous" debt levels [message #379959 ] Di, 11 April 2006 14:48
chris  
"Chris X" <Chris_x [at] postmaster.co.uk> wrote in message
news:xvGdnVOxx_UlDabZRVny3g [at] giganews.com...
>
> "Chris.S" <Chris [at] postmaster.co.uk> wrote in message
> news:443b8eab$0$9237$ed2619ec [at] ptn-nntp-reader01.plus.net...
> >
> > "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> > news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> >> The debt is starting to bite as I told you it would ;-)
> >
> > I thought you said house prices would crash, now you say they are on the
> > up.
>
> As Crowley rightly said, he still has another nine months ! Do try and
keep
> up with the adults, Slimey. Take your nebuliser and have a lie down, come
> back when you're feeling a bit "fresher" !

Are you Crowley's spokesperson or are you just following me around?
Re: Rising house prices fuel "dangerous" debt levels [message #379960 ] Di, 11 April 2006 14:50
chris  
"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
news:1144754825.309344.108110 [at] i39g2000cwa.googlegroups.com...
>
> Chris.S wrote:
> > "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> > news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> > > The debt is starting to bite as I told you it would ;-)
> >
> > I thought you said house prices would crash, now you say they are on the
up.
>
> Try to pay attention Slimey. The point is house prices have achieved
> such ridiculous levels that many buyers are having to take on crippling
> levels of debt to obtain one.
>
> It's a bubble ripe for bursting and as easy money dries up (see other
> thread) watch it go pop with a vengeance.

I have been paying attention, for about 4 years now people have said that
the housing market was set to crash, along with supporting links.
However these claims never came about, but you know what they say, say it
enough times and you may get lucky.
;-)
Re: Rising house prices fuel "dangerous" debt levels [message #379962 ] Di, 11 April 2006 15:20
mogga  
On 11 Apr 2006 02:24:09 -0700, "Crowley" <crowleyalastair [at] yahoo.co.uk>
wrote:

>The debt is starting to bite as I told you it would ;-)

I do hope people hven't borrowed to buy that housepricecrash site...
:)


>....................
>
>Rising house prices fuel "dangerous" debt levels
>Tue Apr 11, 2006 8:09 AM BST
>
> http://investing.reuters.co.uk/news/newsArticle.aspx?type=pr opertyNews&storyID=2006-04-11T070901Z_01_NOA125491_RTRUK OC_0_CITYWIRE-LORNA-HOUSE-PRICES.xml
>
>
>By Lorna Bourke
>
>LONDON (Citywire) - A slew of property data has highlighted the growing
>strain that the resurgent housing market is placing on first-time
>buyers and the wider economy.
>
>One in 10 first-time buyers now use a bank loan or credit card to fund
>a typical deposit of 15,000 pounds, according to smartnewhomes.com, a
>property website. A fifth are resorting to a 100 percent mortgage with
>no deposit as the annual rate of house price inflation measured by
>Halifax more than doubled to 6.2 percent in the last quarter of 2005.
>
>David Bexon, managing director of smartnewhomes.com, said: "New buyers
>now make up less than 25 percent of the market, having been edged out
>by spiralling house prices and limited supply of appropriate
>properties. The levels of debt that first-time buyers now have to take
>on to buy a home is dangerous."
>
>Existing homeowners are also sinking into debt. Bank of England figures
>also released last week show that the level of mortgage equity
>withdrawn by homeowners surged to 11.8 billion pounds in the fourth
>quarter of last year, up from the average of 8.2 billion pounds over
>the previous four quarters. This is equivalent to 5.6 percent of
>post-tax household income.
>
>Jim Cunningham, senior economist at the Council of Mortgage Lenders,
>said this was a "significant pick-up" from the average 4 percent
>quarterly level in the previous 12 months. He noted that real
>disposable income had been flat in the fourth quarter and that
>close-to-trend real spending growth had only been financed by a
>reduction in saving and an increase in mortgage equity
>withdrawal.............................

--
Get money off vouchers for everything
http://www.moneyoffvouchers.co.uk
Re: Rising house prices fuel "dangerous" debt levels [message #379964 ] Di, 11 April 2006 15:38
Chris X  
"Chris.S" <Chris [at] postmaster.co.uk> wrote in message
news:443ba58f$1$9235$ed2619ec [at] ptn-nntp-reader01.plus.net...
>
> "Chris X" <Chris_x [at] postmaster.co.uk> wrote in message
> news:xvGdnVOxx_UlDabZRVny3g [at] giganews.com...
>>
>> "Chris.S" <Chris [at] postmaster.co.uk> wrote in message
>> news:443b8eab$0$9237$ed2619ec [at] ptn-nntp-reader01.plus.net...
>> >
>> > "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
>> > news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>> >> The debt is starting to bite as I told you it would ;-)
>> >
>> > I thought you said house prices would crash, now you say they are on
>> > the
>> > up.
>>
>> As Crowley rightly said, he still has another nine months ! Do try and
> keep
>> up with the adults, Slimey. Take your nebuliser and have a lie down,
>> come
>> back when you're feeling a bit "fresher" !
>
> Are you Crowley's spokesperson or are you just following me around?

Those meds are making you paranoid, Slimey.
Re: Rising house prices fuel "dangerous" debt levels [message #379965 ] Di, 11 April 2006 15:41
M Holmes  
In uk.finance Chris.S <Chris [at] postmaster.co.uk> wrote:

> I have been paying attention, for about 4 years now people have said that
> the housing market was set to crash, along with supporting links.
> However these claims never came about, but you know what they say, say it
> enough times and you may get lucky.

The same was true at the end of the last credit cycle. By 1924/1925 it
was obvious to anyone who looked that there was a stocks bubble going on,
but of course most market participants made "New Plateau" and "new
Paradigm" arguments, ignoring all warnings. That bubble, as many major
credit bubbles do, went on far longer than even the bears figured it
could, and topped in 1929, bottoming as late as 1932.

If one wants to get rich, it's not enough to know that a credit bubble
is reaching the peak. One also has to be able to predict *when* it will
peak. To my knowledge only Prechter Senior managed that.

Of course many people, such as Rockerfeller, saw that it was a bubble and
managed to get out before the top with their cash intact. That's
probably the best that most people will ever manage since of course, the
majority will sell too late and ride the bubble part of, or all of, the
way down.

I can't remember who it was who said that you can look at the smart
money or look at the dumb money, but the largest bubbles will make enough
reverse moves to take the money from everyone still in the market, bull
or bear.

The guys who end up richest in these things have always been those who
got out early and then used their cash to buy assets at 10 cents on the
Dollar at the bottom. Carnegie being a classic example from my own homeland.

FoFP
Re: Rising house prices fuel "dangerous" debt levels [message #379966 ] Di, 11 April 2006 15:43
M Holmes  
Stephen Glynn wrote:

> I wonder how much, though, of the mortgage equity withdrawals are
> because of people using the cash to pay off existing debts, thus
> converting unsecured debts they've already incurred into secured ones
> at a far lower rate of interest. That seems a perfectly sensible thing
> for most people to do.

If one wants to buy a chinese carryout on a 30 year mortgage and pay 3.5
times its value overall, then sure, it's an excellent idea.

Just read today that despite the phenomenal rise in US house prices, the
debt to equity ratio is now larger than when the bubble began. That's a
lot of chinese meals at 30 year rates.

FoFP
Re: Rising house prices fuel "dangerous" debt levels [message #379972 ] Di, 11 April 2006 18:28
Stephen Glynn  
M Holmes wrote:
> Stephen Glynn wrote:
>
>> I wonder how much, though, of the mortgage equity withdrawals are
>> because of people using the cash to pay off existing debts, thus
>> converting unsecured debts they've already incurred into secured ones
>> at a far lower rate of interest. That seems a perfectly sensible thing
>> for most people to do.
>
> If one wants to buy a chinese carryout on a 30 year mortgage and pay 3.5
> times its value overall, then sure, it's an excellent idea.
>
> Just read today that despite the phenomenal rise in US house prices, the
> debt to equity ratio is now larger than when the bubble began. That's a
> lot of chinese meals at 30 year rates.
>
> FoFP
>

Not for the odd takeaway, certainly, but I'd have thought it's a pretty
good idea for someone who's maxed himself out on credit and store cards
which he then finds he can't repay in full every month -- provided, of
course, he doesn't promptly go out and max himself out again once he's
cleared his plastic.

Steve
Re: Rising house prices fuel "dangerous" debt levels [message #379981 ] Mi, 12 April 2006 06:10
frankfmatthews  
Stephen Glynn wrote:

> Crowley wrote:
>
>> The debt is starting to bite as I told you it would ;-)
>> ....................
>>
>> Rising house prices fuel "dangerous" debt levels
>> Tue Apr 11, 2006 8:09 AM BST
>>
>> http://investing.reuters.co.uk/news/newsArticle.aspx?type=pr opertyNews&storyID=2006-04-11T070901Z_01_NOA125491_RTRUK OC_0_CITYWIRE-LORNA-HOUSE-PRICES.xml
>>
>>
>>
>> By Lorna Bourke
>>
>> LONDON (Citywire) - A slew of property data has highlighted the growing
>> strain that the resurgent housing market is placing on first-time
>> buyers and the wider economy.
>>
>> One in 10 first-time buyers now use a bank loan or credit card to fund
>> a typical deposit of 15,000 pounds, according to smartnewhomes.com, a
>> property website. A fifth are resorting to a 100 percent mortgage with
>> no deposit as the annual rate of house price inflation measured by
>> Halifax more than doubled to 6.2 percent in the last quarter of 2005.
>>
>> David Bexon, managing director of smartnewhomes.com, said: "New buyers
>> now make up less than 25 percent of the market, having been edged out
>> by spiralling house prices and limited supply of appropriate
>> properties. The levels of debt that first-time buyers now have to take
>> on to buy a home is dangerous."
>>
>> Existing homeowners are also sinking into debt. Bank of England figures
>> also released last week show that the level of mortgage equity
>> withdrawn by homeowners surged to 11.8 billion pounds in the fourth
>> quarter of last year, up from the average of 8.2 billion pounds over
>> the previous four quarters. This is equivalent to 5.6 percent of
>> post-tax household income.
>>
>> Jim Cunningham, senior economist at the Council of Mortgage Lenders,
>> said this was a "significant pick-up" from the average 4 percent
>> quarterly level in the previous 12 months. He noted that real
>> disposable income had been flat in the fourth quarter and that
>> close-to-trend real spending growth had only been financed by a
>> reduction in saving and an increase in mortgage equity
>> withdrawal.............................
>>
>
> I wonder how much, though, of the mortgage equity withdrawals are
> because of people using the cash to pay off existing debts, thus
> converting unsecured debts they've already incurred into secured ones
> at a far lower rate of interest. That seems a perfectly sensible thing
> for most people to do.
>
> Steve

The problem is moving into a large debt at a variable rate. If the
rates jump then the debt can easily become unsustainable. The problem
is a bit less in most of the US where creative finance is less common
and 30 year amortization on fixed rates is the common situation.
Re: Rising house prices fuel "dangerous" debt levels [message #379982 ] Mi, 12 April 2006 06:13
frankfmatthews  
Stephen Glynn wrote:

> M Holmes wrote:
>
>> Stephen Glynn wrote:
>>
>>> I wonder how much, though, of the mortgage equity withdrawals are
>>> because of people using the cash to pay off existing debts, thus
>>> converting unsecured debts they've already incurred into secured ones
>>> at a far lower rate of interest. That seems a perfectly sensible thing
>>> for most people to do.
>>
>>
>> If one wants to buy a chinese carryout on a 30 year mortgage and pay 3.5
>> times its value overall, then sure, it's an excellent idea.
>>
>> Just read today that despite the phenomenal rise in US house prices, the
>> debt to equity ratio is now larger than when the bubble began. That's a
>> lot of chinese meals at 30 year rates.
>>
>> FoFP
>>
>
> Not for the odd takeaway, certainly, but I'd have thought it's a pretty
> good idea for someone who's maxed himself out on credit and store cards
> which he then finds he can't repay in full every month -- provided, of
> course, he doesn't promptly go out and max himself out again once he's
> cleared his plastic.
>
> Steve

The problem with your scenario is the maxing out of the plastic in the
first place. Many of these folks find their plastic load to be just as
high in a little while. In the US the levels of plastic available are
silly.
Re: Rising house prices fuel "dangerous" debt levels [message #379989 ] Mi, 12 April 2006 13:02
M Holmes  
In uk.finance Stephen Glynn <7won-t15h [at] dea.spamcon.org> wrote:

[Moving debt indoors...]

> Not for the odd takeaway, certainly, but I'd have thought it's a pretty
> good idea for someone who's maxed himself out on credit and store cards
> which he then finds he can't repay in full every month -- provided, of
> course, he doesn't promptly go out and max himself out again once he's
> cleared his plastic.

The thing is that there's a price to be paid for moving one's debt onto
the house and that's that the house is put at risk if the debt can't be
paid. In the circumstances that we're discussing, it transpires that
the average yank now not only has a higher debt to equity ratio than
when the bubble started (and it's climbing because the majority of new
buyers now either have no deposit or borrow it elsewhere) but their cash
liquidity is down to 3 weeks of earning power rather than the
recommended six months. Any interruption to wages for a month will put
the average Joe behind with the mortgage and ultimately at risk of
losing the house. That's a big price to pay for putting a chinese meal
on the credit card.

Have a look at this: it's amusing and frightening:

http://tinyurl.com/nzqg9

FoFP
Re: Rising house prices fuel "dangerous" debt levels [message #379990 ] Mi, 12 April 2006 13:07
M Holmes  
In uk.finance Frank F. Matthews <frankfmatthews [at] houston.rr.com> wrote:

> The problem is moving into a large debt at a variable rate. If the
> rates jump then the debt can easily become unsustainable.

A huge number of Brits are one currency crisis away from losing their
house. If we did an Iceland and were forced to hike rates to 11.5%, most
folks would be unable to service their debts.

> The problem is a bit less in most of the US where creative finance is
> less common and 30 year amortization on fixed rates is the common
> situation.

Not true anymore. More than half of new mortgages in the uS in the last
two years have been low introductory rate VBR mortgages, or something
even more exotic like interest-only or negative amortisation (you don't
even pay all the interest). That's alongside folks taking 100% loan to
value or borrowing the deposit via another loan. Now that some folks are
being reset from 2% interest to 6.4% interest and are being required to
start making capital repayments, they're looking at tripling or
quadrupling of their mortgage payments and were already overstretched.
It's not panning out as pretty...

FoFP
Re: Rising house prices fuel "dangerous" debt levels [message #379993 ] Mi, 12 April 2006 14:02
sigvald  
M Holmes wrote:
> In uk.finance Frank F. Matthews <frankfmatthews [at] houston.rr.com> wrote:
>
> > The problem is moving into a large debt at a variable rate. If the
> > rates jump then the debt can easily become unsustainable.
>
> A huge number of Brits are one currency crisis away from losing their
> house. If we did an Iceland and were forced to hike rates to 11.5%, most
> folks would be unable to service their debts.

Many Icelanders would also be forced to sell their homes if the
interest rates were as high as that, the interest rates on property
here are between 4 and 5.5 %, it is normal consumption loans and
overdrafts that have higher rates of interest.
Re: Rising house prices fuel "dangerous" debt levels [message #379994 ] Mi, 12 April 2006 14:08
M Holmes  
In uk.finance sigvald [at] binet.is wrote:

>> A huge number of Brits are one currency crisis away from losing their
>> house. If we did an Iceland and were forced to hike rates to 11.5%, most
>> folks would be unable to service their debts.

> Many Icelanders would also be forced to sell their homes if the
> interest rates were as high as that, the interest rates on property
> here are between 4 and 5.5 %, it is normal consumption loans and
> overdrafts that have higher rates of interest.

Maybe the government should remortgage the island to get better rates on
its loans.

FoFP
Re: Rising house prices fuel "dangerous" debt levels [message #379998 ] Mi, 12 April 2006 15:31
Tumbleweed  
"M Holmes" <fofp [at] holyrood.ed.ac.uk> wrote in message
news:e1in1n$db9$3 [at] scotsman.ed.ac.uk...
> In uk.finance Frank F. Matthews <frankfmatthews [at] houston.rr.com> wrote:
>
>> The problem is moving into a large debt at a variable rate. If the
>> rates jump then the debt can easily become unsustainable.
>
> A huge number of Brits are one currency crisis away from losing their
> house. If we did an Iceland and were forced to hike rates to 11.5%, most
> folks would be unable to service their debts.
>


So? Name a time when you couldn't have said;

"A huge number of Brits are one currency crisis away from losing their
house. If we were forced to hike rates to <double the current interest
rate>,
most folks would be unable to service their debts."

--
Tumbleweed

email replies not necessary but to contact use;
tumbleweednews at hotmail dot com
Re: Rising house prices fuel "dangerous" debt levels [message #380001 ] Mi, 12 April 2006 16:26
sigvald  
M Holmes wrote:
> In uk.finance sigvald [at] binet.is wrote:
>
> >> A huge number of Brits are one currency crisis away from losing their
> >> house. If we did an Iceland and were forced to hike rates to 11.5%, most
> >> folks would be unable to service their debts.
>
> > Many Icelanders would also be forced to sell their homes if the
> > interest rates were as high as that, the interest rates on property
> > here are between 4 and 5.5 %, it is normal consumption loans and
> > overdrafts that have higher rates of interest.
>
> Maybe the government should remortgage the island to get better rates on
> its loans.

Iceland has one of the highest credit ratings in the world, it cannot
get any better rates.
The interest rates have been raised because the inflation is moving
upwards, a result of an expansive period with huge investments in heavy
industry and hydro-electric power among other things.
Re: Rising house prices fuel "dangerous" debt levels [message #380003 ] Mi, 12 April 2006 16:53
Graham Murray  
"Tumbleweed" <thisaccountneverread [at] yahoo.com> writes:

> "A huge number of Brits are one currency crisis away from losing
> their house. If we were forced to hike rates to <double the current
> interest
> rate>,
> most folks would be unable to service their debts."

Except that most potential buyers would also not be able to service
the increased interest rates. This and the large number of houses
on sale would probably force a considerable price crash.

As an aside, the financial institutions make considerable profits with
the current interest rates. If the interest rates were raised
substantially, many borrowers (both mortgage and credit card) would
default and the institutions would not recover the loans. So, it would
appear not to be in the financial institutions interest to make large
increases to the interest rate.
Re: Rising house prices fuel "dangerous" debt levels [message #380004 ] Mi, 12 April 2006 17:27
frankfmatthews  
M Holmes wrote:

> In uk.finance Stephen Glynn <7won-t15h [at] dea.spamcon.org> wrote:
>
> [Moving debt indoors...]
>
>
>>Not for the odd takeaway, certainly, but I'd have thought it's a pretty
>>good idea for someone who's maxed himself out on credit and store cards
>>which he then finds he can't repay in full every month -- provided, of
>>course, he doesn't promptly go out and max himself out again once he's
>>cleared his plastic.
>
>
> The thing is that there's a price to be paid for moving one's debt onto
> the house and that's that the house is put at risk if the debt can't be
> paid. In the circumstances that we're discussing, it transpires that
> the average yank now not only has a higher debt to equity ratio than
> when the bubble started (and it's climbing because the majority of new
> buyers now either have no deposit or borrow it elsewhere) but their cash
> liquidity is down to 3 weeks of earning power rather than the
> recommended six months. Any interruption to wages for a month will put
> the average Joe behind with the mortgage and ultimately at risk of
> losing the house. That's a big price to pay for putting a chinese meal
> on the credit card.
>
> Have a look at this: it's amusing and frightening:
>
> http://tinyurl.com/nzqg9
>
> FoFP
>

It only makes a difference if the house is protected against unsecured
creditors.

A debt to equity ratio really makes little sense. The issue is the
carrying power of income in relation to the debt.

As far as liquidity is concerned the issue there is what can be done to
cover expenses while you liquidate assets. Life has changed over the
years and it depends on how much of your short term borrowing power you
have used. I doubt that anyone sensible has 6 months earnings in liquid
assets.

While running up debt to sustain spending is questionable you will not
face foreclosure in 1 month. It does take a while. Even with
government guarantees for loans lenders do not like the mess if they
have some hope of recovery. Now 6 months without a job and many will be
in trouble.
Re: Rising house prices fuel "dangerous" debt levels [message #380036 ] Do, 13 April 2006 05:17
frankfmatthews  
Chris.S wrote:

> "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>
>>The debt is starting to bite as I told you it would ;-)
>
>
> I thought you said house prices would crash, now you say they are on the up.
>
>

They will keep going up until they crash and then they will go down.
Re: Rising house prices fuel "dangerous" debt levels [message #380038 ] Do, 13 April 2006 09:00
Tumbleweed  
"Frank F. Matthews" <frankfmatthews [at] houston.rr.com> wrote in message
news:ypj%f.20592$yy4.4826 [at] tornado.texas.rr.com...
>
>
> Chris.S wrote:
>
>> "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
>> news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>>
>>>The debt is starting to bite as I told you it would ;-)
>>
>>
>> I thought you said house prices would crash, now you say they are on the
>> up.
>>
>>
>
> They will keep going up until they crash and then they will go down.
>

another nostradamus lookalike.

--
Tumbleweed

email replies not necessary but to contact use;
tumbleweednews at hotmail dot com>
Re: Rising house prices fuel "dangerous" debt levels [message #380054 ] Do, 13 April 2006 16:35
frankfmatthews  
>>Chris.S wrote:
>>
>>
>>>"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
>>>news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>>>
>>>
>>>>The debt is starting to bite as I told you it would ;-)
>>>
>>>
>>>I thought you said house prices would crash, now you say they are on the
>>>up.

> "Frank F. Matthews" <frankfmatthews [at] houston.rr.com> wrote in message
> news:ypj%f.20592$yy4.4826 [at] tornado.texas.rr.com...

>>They will keep going up until they crash and then they will go down.

Tumbleweed wrote:
> another nostradamus lookalike.
>

No his statements are meaningless and cryptic. Mine above is simply
meaningless. It is intended to fit with what this thread has become.
Re: Rising house prices fuel "dangerous" debt levels [message #380063 ] Do, 13 April 2006 18:24
Tumbleweed  
"Frank F. Matthews" <frankfmatthews [at] houston.rr.com> wrote in message
news:4lt%f.21207$yy4.6053 [at] tornado.texas.rr.com...
>
>>>Chris.S wrote:
>>>
>>>
>>>>"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
>>>>news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>>>>
>>>>
>>>>>The debt is starting to bite as I told you it would ;-)
>>>>
>>>>
>>>>I thought you said house prices would crash, now you say they are on the
>>>>up.
>
> > "Frank F. Matthews" <frankfmatthews [at] houston.rr.com> wrote in message
> > news:ypj%f.20592$yy4.4826 [at] tornado.texas.rr.com...
>
>>>They will keep going up until they crash and then they will go down.
>
> Tumbleweed wrote:
>> another nostradamus lookalike.
>>
>
> No his statements are meaningless and cryptic. Mine above is simply
> meaningless. It is intended to fit with what this thread has become.

Ah! I understand, sarcasm. Sorry, so used to the level of predictions being
similar to that I failed to recognise it :-)

--
Tumbleweed

email replies not necessary but to contact use;
tumbleweednews at hotmail dot com
Re: Rising house prices fuel "dangerous" debt levels [message #380086 ] Fr, 14 April 2006 15:37
Christian Konrad  
Crowley wrote:
>
[snip]

> David Bexon, managing director of smartnewhomes.com, said: "New buyers
> now make up less than 25 percent of the market..

What is the significance of this figure? All that means to me is that
people buy, on average, more than four homes in their lifetime.

>
> Existing homeowners are also sinking into debt. Bank of England figures
> also released last week show that the level of mortgage equity
> withdrawn by homeowners surged to 11.8 billion pounds in the fourth
> quarter of last year, up from the average of 8.2 billion pounds over
> the previous four quarters. This is equivalent to 5.6 percent of
> post-tax household income.

5.6 percent? Is that really a problem?


--
------------------------------------------------------------ -----------
To reply to me directly:

Replace privacy.net with: totalise DOT co DOT uk and replace me with
gareth.harris
Re: Rising house prices fuel "dangerous" debt levels [message #382722 ] Di, 18 April 2006 00:45
chris  
"Chris X" <Chris_x [at] postmaster.co.uk> wrote in message
news:1uedndrIVt2OLKbZRVnyvg [at] giganews.com...
>
> "Chris.S" <Chris [at] postmaster.co.uk> wrote in message
> news:443ba58f$1$9235$ed2619ec [at] ptn-nntp-reader01.plus.net...
> >
> > "Chris X" <Chris_x [at] postmaster.co.uk> wrote in message
> > news:xvGdnVOxx_UlDabZRVny3g [at] giganews.com...
> >>
> >> "Chris.S" <Chris [at] postmaster.co.uk> wrote in message
> >> news:443b8eab$0$9237$ed2619ec [at] ptn-nntp-reader01.plus.net...
> >> >
> >> > "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> >> > news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> >> >> The debt is starting to bite as I told you it would ;-)
> >> >
> >> > I thought you said house prices would crash, now you say they are on
> >> > the
> >> > up.
> >>
> >> As Crowley rightly said, he still has another nine months ! Do try and
> > keep
> >> up with the adults, Slimey. Take your nebuliser and have a lie down,
> >> come
> >> back when you're feeling a bit "fresher" !
> >
> > Are you Crowley's spokesperson or are you just following me around?
>
> Those meds are making you paranoid, Slimey.

Hmm, so your reply is just in my imagination?
Re: Rising house prices fuel "dangerous" debt levels [message #382723 ] Di, 18 April 2006 00:48
chris  
"M Holmes" <fofp [at] holyrood.ed.ac.uk> wrote in message
news:e1gbmc$abt$1 [at] scotsman.ed.ac.uk...
> In uk.finance Chris.S <Chris [at] postmaster.co.uk> wrote:
>
> > I have been paying attention, for about 4 years now people have said
that
> > the housing market was set to crash, along with supporting links.
> > However these claims never came about, but you know what they say, say
it
> > enough times and you may get lucky.
>
> The same was true at the end of the last credit cycle. By 1924/1925 it
> was obvious to anyone who looked that there was a stocks bubble going on,
> but of course most market participants made "New Plateau" and "new
> Paradigm" arguments, ignoring all warnings. That bubble, as many major
> credit bubbles do, went on far longer than even the bears figured it
> could, and topped in 1929, bottoming as late as 1932.
>
> If one wants to get rich, it's not enough to know that a credit bubble
> is reaching the peak. One also has to be able to predict *when* it will
> peak. To my knowledge only Prechter Senior managed that.
>
> Of course many people, such as Rockerfeller, saw that it was a bubble and
> managed to get out before the top with their cash intact. That's
> probably the best that most people will ever manage since of course, the
> majority will sell too late and ride the bubble part of, or all of, the
> way down.
>
> I can't remember who it was who said that you can look at the smart
> money or look at the dumb money, but the largest bubbles will make enough
> reverse moves to take the money from everyone still in the market, bull
> or bear.
>
> The guys who end up richest in these things have always been those who
> got out early and then used their cash to buy assets at 10 cents on the
> Dollar at the bottom. Carnegie being a classic example from my own
homeland.
>

Not going to debate historical facts but there are many, including you, who
for years have made claims there was to be either a house price crash or a
credit bubble burst.
It hasn't happened but I suppose if you say it often enough you are going to
get it right.
Re: Rising house prices fuel "dangerous" debt levels [message #382724 ] Di, 18 April 2006 00:49
chris  
"Frank F. Matthews" <frankfmatthews [at] houston.rr.com> wrote in message
news:ypj%f.20592$yy4.4826 [at] tornado.texas.rr.com...
>
>
> Chris.S wrote:
>
> > "Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
> > news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
> >
> >>The debt is starting to bite as I told you it would ;-)
> >
> >
> > I thought you said house prices would crash, now you say they are on the
up.
> >
> >
>
> They will keep going up until they crash and then they will go down.

They may go down but without it being a crash
Re: Rising house prices fuel "dangerous" debt levels [message #382726 ] Di, 18 April 2006 00:56
Chris X  
"Chris.S" <Chris [at] postmaster.co.uk> wrote in message
news:44441aa4$0$9240$ed2619ec [at] ptn-nntp-reader01.plus.net...
>
> "Chris X" <Chris_x [at] postmaster.co.uk> wrote in message
> news:1uedndrIVt2OLKbZRVnyvg [at] giganews.com...

>> >> > I thought you said house prices would crash, now you say they are on
>> >> > the up.

>> >> As Crowley rightly said, he still has another nine months ! Do try
>> >> and
>> > keep up with the adults, Slimey. Take your nebuliser and have a lie
>> > down,
>> >> come back when you're feeling a bit "fresher" !
>> >
>> > Are you Crowley's spokesperson or are you just following me around?
>>
>> Those meds are making you paranoid, Slimey.
>
> Hmm, so your reply is just in my imagination?

Yeah, you're cracking up live on Usenet, Slimey - Again !
Re: Rising house prices fuel "dangerous" debt levels [message #382728 ] Di, 18 April 2006 03:53
frankfmatthews  
Chris.S wrote:
> "Frank F. Matthews" <frankfmatthews [at] houston.rr.com> wrote in message
> news:ypj%f.20592$yy4.4826 [at] tornado.texas.rr.com...
>
>>
>>Chris.S wrote:
>>
>>
>>>"Crowley" <crowleyalastair [at] yahoo.co.uk> wrote in message
>>>news:1144747449.411081.126750 [at] u72g2000cwu.googlegroups.com...
>>>
>>>
>>>>The debt is starting to bite as I told you it would ;-)
>>>
>>>
>>>I thought you said house prices would crash, now you say they are on the
>
> up.
>
>>>
>>They will keep going up until they crash and then they will go down.
>
>
> They may go down but without it being a crash
>
>

Only if there is a prior drop off in the buy to rent craze in the UK.
There appears to be so much property involved that any perceived threat
to profits from rising prices would bring enough property onto the
market to cause a reasonable crash.
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