RBS, repossessions and recovery
Stephen Hester, the new chief executive of Royal Bank of Scotland, is perhaps showing unusual common sense for a banker.
On taking one of the hottest seats in corporate UK, he decided that his priority had to be to prevent his industry becoming public enemy number one - which is a genuine risk, since the excesses of his industry made quite a contribution to the economic mess we find ourselves in.
So it was his initiative - rather than an instruction by ministers - that Royal Bank will delay the start of proceedings to repossess the homes of those falling behind on mortgage payments.
The owner of NatWest, which has about 7% of the housing market, announced late last night that it would postpone the beginning of the process to seize a residential property till the overstretched borrower is six months in arrears, twice the industry's "best-practice" trigger of three months.
And it informed ministers at 10pm, around the same time as it was briefing the media.
Which is not to say there's been no political pressure on Hester to do precisely this kind of thing. As of Friday, Royal Bank became 58% owned by the state - and the Treasury is desperate to prove that taxpayers are getting some kind of social return for the £20bn we've injected into this battered bank.
The point is that Hester saw the writing on the wall and didn't pretend that he couldn't read it - which would not be true of all his banking peers.
Here's the positive side of what Royal Bank has done: it gives those who lose their jobs in the looming wave of redundancies a better chance of getting a new source of income in time to prevent the bank seizing the family property.
But there is a cost, which will fall on estate agents and - possibly - anyone interested in seeing an end to the savage deflation of house prices.
How so?
Well, the disposal of repossessed property has become a vital source of income for many estate agents, at a time when property sales have collapsed by well over half and many agents are on the verge of collapse.
You may not weep for them, though you only have to look at your own high street to recognise quite how many thousands are employed by them (there are 10,000 members of the National Association of Estate Agents, so numbers on their payroll is a multiple of that).
Also there is a reason why delaying a great surge of repossessions may not be a good thing for anyone hoping for a recovery in the housing market.
The assorted surveys by banks and the Land Registry, together with anecdotal evidence, suggest that house prices are between 10 and 20% down from their peak - which, according to most forecasters, suggests that prices have another 15% to 20% to fall.
House prices are taking weeks and months to find a floor, that low-point from which recovery can begin, because many potential sellers are biding their time, hoping that something will turn up - while buyers are waiting for a crash that delivers bargains.
So the brutal truth is that a great downward whoosh in prices, the moment of catharsis, is most likely to come as and when there's a great surge in forced selling, which would be the consequence of a widely anticipated rise in repossessions.
But if all banks follow the lead of Royal Bank and add another three months to the schedule of seizing a home, well that's another three months to wait for the laws of supply and demand to exert their inevitable downward pressure on prices.
Which also means that there's another three months to wait for the crippling housing deflation to end - which also postpones a wider economic recovery, since the housing market is not hermetically sealed from the rest of the economy.
Doubtless the government will exert massive pressure on other banks to follow the example of Royal Bank, but they shouldn't kid themselves that interfering in the market brings no costs.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~05~RS~)
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"The assorted surveys by banks and the Land Registry..."
And now we know that the Government is rigging the Land Registry figures, by only allowing sales at a high price to be included: http://www.guardian.co.uk/business/2008/nov/30/house-price-index-market-value
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Although this is a welcome first step, it is only that. We continue, with this one-size-fits-all system which is so ripe for abuse by both sides, to treat citizens inequitably. Each borrower's circumstances are different, and may change rapidly. Moreover, the bank's exposure to each is different, and two otherwise identical cases may result in different treatment because of the relative negative equity positions underlying the repossession. Moreover, it may be inequitable to repossess a borrower who has paid off 19 years' of a 20-year loan simply because he became redundant, there must surely be some independant review of such cases insofar as risk is an element in the margin above base rate charged, and therefore the small amount remaining might justly be foregone.
From another angle, dumping a family onto the street to leave a property empty because of the dearth of buyers is also immoral. Surely the first port of call should be the local authority, to take a stake in the equity and effectively take the property at least partially into the public housing stock. Such a family will draw on that facility in any case, so why go to the expense of shifting people unnecessarily when the losses will fall to the public purse anyway in the long run?
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Allowing the defaulter a further 3 months to build up arrears is just going to add further costs to mount up for the banks.
The likelyhood of anyone being able to pay down arrears furhter than a couple of months suggests that this is an ill thought out policy.
Incidentally, the government start supporting home owners at 6 months dont they?
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"he decided that his priority had to be to prevent his industry becoming public enemy number one "
- so who's No. 1 at the moment if it isn't the Banks ??
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"the disposal of repossessed property has become a vital source of income for many estate agents, at a time when property sales have collapsed"
"a vital source " ????
- er NO - just a drop in the ocean of properties not selling because hardly anyone is buying !!
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With only 7% of the mortgage market this is not hugely important - what is government owned Northern Rock going to do. It is one of the biggest and the one that granted 125% mortgages on which it is going to sustain massive losses?
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"suggests that prices have another 15 per cent to 20 per cent to fall."
WOW - would any one in their right mind buy a property at the moment unless they get atleast another 15% deducted off the price.
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The assumption that property prices may fall a further 15% or so may be wrong for two reasons, Robert mentions supply and demand in I assume relation to money. The supply of which is being increased at an unprecedented rate around the world by governments. The real supply and demand for property has not changed we still have a housing shortage in the UK in main due to restrictive planning, this shortage is accelerating due to a massive downturn in new builds.
It is just as likely as interest rates fall that people will again invest in the only real tangible asset the majority of the population aspire to own.
The reccession may be shorter lived than the now dis- credited so called experts predict. Never in history has there been such a concerted effort on behalf of governments to re- inflate it is bound to have an effect.
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The Land Registry figures are flawed into significant overestimation of price rises by another more subtle problem:
In order to make a "fair" comparison they only include properties that have been sold more than once during the period they are considering.
This skews price rises upwards since houses that are done up tend to be flipped pretty quickly (and hence are much more likely to be included in the figures), and often with a significant mark up in price - which gives a false impression of price rises in the locality.
On the other hand, when people stop buying property just so they can do it up and make a quick profit (often on the basis of their substandard DIY), the Land Registry figures will presumably make a rapid adjustment downwards towards the true picture - something that seems to be happening right now.
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Oh dear as usual the BBC go for the negative spin, come on Rob surely your going to predict the sun going down late this afternoon and how bad that will be on the "global ecomony"
Your now becoming very very boring
Oh yeah what did ever happen to bird flu?
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In my experience of working for a bank it would in normal circumstances take much longer than 6 months before legal proceedings were started. Despite the image that the media would like to promote legal action was always a last resort
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3 months or six months??
Good for P.R. maybe?
Somehow i doubt that there will be a
positive effect.
Good to hear London & Scottish have gone.
If RBS/NATWEST want to bring good news
the best thing they can do is NOT supply
sub prime lenders with facilities.
I am aware of one SUB PRIME Lender that
has a near
ONE BILLION FACILITY with RBS/NATWEST.
Time for a CURTAIN CALL?
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RE HOUSE PRICES
The BEST BAROMETER is AUCTIONS.
AUCTION PRICES ARE 40/60% DOWN
AGAINST PRICES PAID FROM 2005/2007.
Robert check the RADIO 4 program from
last tuesday evening.
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I do not believe RBS's announcement is based on philanthropy. Rather it is a cynical attempt to try to fool the public that they have suddenly become the good guys.
For a start, they know that they will not be able to sell the repossessed properties, so might as well have someone living there keeping the property safe.
Also, I wonder if the tenants will be allowed to just make zero payments, or if they will find a way of extracting whatever income they can from them even if it does not cover the full payments.
And finally, what will the tenants do when their time is up? All they will have gained is a few months and the chances of the money needed suddenly becoming available is slim indeed. In the long run they will be no better off.
Neither housing or the economy are going to bounce back anytime soon. For me the banks should remain public enemy number 2, number 1 is in 10 Downing Street.
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yes but the loan sharks will still step in pretty quickly. Many owners have other loans backed onto their property.
So this won;t totally prevent the foreclosure of loans.
Also , it is just buying time and stincks of political intervention- no doubt by some back door civil servent advisesing the banker that the 'ministers would deem such a move as very worth while in the current circumstances- and a way for you to repay their largesse with the taxpayers money'
Whoops- the Anti Terrorism squad will be round in 30 minutes.
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And it also means another 3 months of interest on the debt, inceasing the debt and reducing the homeowners equity. Like all "solutions" this just adds to the problem. And means the problem will take longer to resolve.
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So they are going to wait an extra 3 months, this should give them plenty of time to harrass and bully the consumer.
The only thing that is required is if the banks agree to help, Not defer.
I am sure that the banks wil give these customer accounts to Debt Collection Agencies long before the 6 month grace is up
and if repossesion is the last resort then will the banks ensure that the property is sold at the correct market value and not go for the quick sale, knowing full well that the customer will still have to stump up the shortfall.
Doubt It
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Another band-aid. When is our government going to realise there's nothing they can do? The market ALWAYS wins.
If central economic planning was so effective, the Soviet Union would have become a utopia. Brown needs to get out of the way and let the free-market work it out.
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3 Peterskitchen
"Allowing the defaulter a further 3 months to build up arrears is just going to add further costs to mount up for the banks."
Am I not right in thinking that in the UK hading back the keys does not clear the debt like it does in the USA.
When a house is reclaimed by the bank and it is sold the proceeds go towards the cost of reclaiming and the mortgage. It is only then that either any outstanding money is returned to the individual. If it is less than the outstanding mortgage the debt to the bank remains.
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So the prudent will be subsidising the imprudent for years to come with higher taxes for decades.
What about the 'borrow to let' 'investors' and their dozens of properties. Why should I as a prudent taxpayer bail them out - when all they have done is prevent my children buying a house with their greed?
The world really is upside down.
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RE DEBT COLLECTING AGENCIES?????
HEY THERE FRAU SMIT.
YOU could use the ANTITERRORISM
LEGISLATION against the DEBT
COLLECTORS.
YOU WOULD GET A FAIR FEW VOTES FOR
GORDY. . . .
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The defining feature of the government's actions in this crisis has been to delay the inevitable. When, by definition, the inevitable comes it will be much, much worse than if the government had let the fundamental laws of economics do their work.
Whether it be pumping money into dodgy banks, exhorting banks to lend, lend, lend, exhorting consumers to spend, spend, spend or salivating over RBS's decision to delay the clean out of the housing market ... all of these policies are ultimately about living beyond our means.
Only when we get back into supply-demand balance and without excessive levels of unserviceable debt will our economy stand half a chance of surviving, let alone thriving.
Economics - which is often about human behaviour - was never one of Gordon's strong points; hence the unholy mess in which we now find ourselves and the pain we're going to experience coming out of it. We really ain't seen nothing yet, believe me.
Pity the Tories if/when they get back into power. Of all the Labour economic messes thus far created (for that is their track record), this one is going to be the mother of all problems to fix.
Some legacy for Gordon Brown eh? He thought he was so smart when all along, some of us saw him for what he is: a Machiavellian megalomaniac, bereft of either leadership attributes or social skills who saw taxpayers' money as his own; a bloke with a warped notion of social justice who secured office by stealth. Small wonder Brown's unlikely to go down in history as anything other than a disastrous and, moreover, unelected Prime Minister.
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Dear Robert
Two weeks ago i told you that Briatin is enroute to change to the Euro, behind the Excuse of the finanacial Crisis, that has devalued the pound so drastically.
WELL it is now confirmed that this crisis has now made it a possiblity and the Tresury has instigated plans to do just that.
In amounst all thsi turmiol do you not think that this was the intention anyway.??
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The argument regarding this measure delaying a final cathartic crash in the housing market and thus any recovery is illogical. It presupposes that troubled mortgage-payers will not be able to use the six month grace period to improve their situation.
The whole point of the measure is to reduce the number of repossessions, not merely to delay them. If the six month extension does work, then there will be fewer repossession 'fire-sales' undermining the rest of the market. So these measures may well help to stem house price deflation.
That said, I think the key to the supply and demand issue right now is not repossession, but re-mortgaging. When buy-to-letters find they cannot re-mortgage at last-year's low rates they have to decide whether to sell-up or take a loss. Those who cannot afford to maintain an expensive re-mortgage, particularly if they are over-stretched, are selling at any price. As re-mortgage rates drop, supply to the housing market may well decrease as continuing rental makes more financial sense.
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Robert
I am truly impressed by your ability to forecast the future of house prices and further impressed by your complete and full understanding of the supply and demand for property here in the UK.
You appear to have a full grasp of the affordability?
Do you not think a delay in repossessions is also a potentially good?
3 months is no time at all for most people who have zero contingencies to get back on their feet.
For the banks it would be better for the homeowner to get back on their feet and so avoid repossession completely.
I believe the banks will realise smaller long term losses by doing this.
DO YOU not see that?
Balance is not a strong element in your reporting!
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And so it begins, secret calls no doubt to lean on Hester to 'lead the way.'
Now the Government owns the banks they will do their bidding. I predict a sad outcome for this approach.
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defering repossesions for 6 months is irresponsible of the banks, if you broke your leg you would not wait 6 months to get it mended.
why not get individuals in and alter their repayment plans for the next 24 months, so if you were paying 600 pounds it drops to 400[ a 25% reduction in repayment] and that outstanding 200 pounds from that period [the 24 months, lets call it a gap window] is simply added to your repayment plan in the form of an extra year or 2, so instead paying over 25 years it's now 26 or 27 years at the most.
Therefore you get 24 months mutiplied by £200 (balance of 25% drop]in repayment plan divided by 600 [ your normal monthly repayment] = an extra 8 months repayment
lets say at the end of six months the house owner is made redundant, with the knowledge that we are in a somewhat recession, any surplus income would and could be put aside to manoeuvre.
One other thing if your home is put thru the channels of being repossed at a later date wouldn't the negative equity of your property of increased.
As for those who think where in a recession, it hasn't even started, those taxpayer loans and interest rate cuts was just to keep the ship sailing.
Remember
Festive periods is probably the biggest money making machine throughout the year, even if people are not buying clothings and other luxuries, they' ll definitely be buying food and a counter measure that has already happened 'the hike energy prices', to cover the eventuality of those who want to stay indoors.
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#10 "Oh yeah what did ever happen to bird flu?"
A few died; the rest flew !!
Just thought you'd like to know !! :-)
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I think #3 has it right in the last sentence.
Its just good business: after 6 months people can claim mortgage interest benefit and the taxpayer will handle their mortgage payments. It is not in the bank's interest to force things to a head before the interest benefit kicks in. This way they get the interest on a loan financed by taxpayer loans to them paid by the taxpayer.
Also, if house prices fall significantly as a result of reposessions the banks' loan book will look riskier and that willl lead to nationalisation and that won't do much for the value of the RBS shares Mr Hester was given when he joined.
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Bert - give the bank some credit here albeit not alot
Alexandercurzon - auctions - you really are having a laugh and obviously no clue
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It's a start, as interest rates fall more people will be able to pay and the arrears can be cleared in the longer term.
I disagree with the comment that there will be a surge of reposessions flooding the market and driving prices down, on the contrary the numbers will decline as banks realise that they would be better served holding onto some of the housing assets and renting them through the next couple of years. There are too many vulture funds buying now to allow a freefall of prices.
The issue for people who cant pay their mortgage is around preposession, wouldn't they be better off renting the property they are in than on the housing list and if they have some equity wouldnt it be better to provide support and services that allow them to sell thier home and downsize or rent rather than go through the expese of reposession?
There are still too few houses particularly in the South East it will take a relatively small slow down in supply and rise in buyers to alter the dynamics with or without the banks or government blessing
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I do not follow Roberts logic on this. If repossessions stopped tomorrow then the downward pressure on house prices would also stop as the supply of cheap property would have dried up and investors (or scavengers depending on your point of view) would have to act quickly to get the current stock of distress sales, so stopping reposessions would create the bottom to the market, not delay it.
It is crazy that we allow a family to be reposessed and thrown out of a house with a £300 a month mortgage only to pay housing benefit to a landlord to put them into a house which costs the tax payer £500 a month inbenefits. it would be far better for the government to take a charge on the house and pay the mortgage so they would get the money back when the house is eventually sold or when the home owner is back on their feet and can remortgage. The way we pay benefits in this country is so twisted and pervers that we spend thousands of pounds to stop the "scroungers" from getting anything, but the scroungers have paid tax like everyone else and are entitled to the protection of the welfare state, unless of course we now believe only the banks are deserving recipients of state aid!
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#19 "If it is less than the outstanding mortgage the debt to the bank remains."
Actually, in many cases, this is not so because the mortgage is usually covered by a default insurance policy that is usually "sold" to the borrower by the *lender* acting in its capacity as a *broker* for the insurance company !! In good times, this was viewed as "money for old rope" !! Now, many insurers are hurting, especially from covering 125% mortgages !!
This leads to yet another level of pain for the financial services community that got hijacked by the salesmen from the true professionals !!
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Robert,
I cannot lie I do not own a house and I am depending upon this correction to make the average three bedroom house affordable once more. Having saved for 10 years, and felt the pain of having my investments being worth far less than I paid into them, I finally cash in my PEPs and ISAs back in Oct of 2007 and made an acceptable return.
As such, I am not interested in seeing "an end to the savage deflation of house prices". Furthermore, it angers me to the very essence of my being that my taxes are being used to support the housing market:
"As of Friday, Royal Bank became 58% owned by the state - and the Treasury is desperate to prove that taxpayers are getting some kind of social return for the £20bn we've injected into this battered bank."
I totally agree with you sentiment that "massive pressure" will be placed upon the banks to follow the lead of RBS, after all the British non-economy is based on rising house prices. That's why I raised the following petition:
http://petitions.number10.gov.uk/LendingReform/
In truth I don't believe the Government gives two hoots about the unfortunate person caught up in all this mess. They're just looking for votes and the return to an asset based economy.
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Repossessions seem likely to be around 6-8% of the properties sold this year - so is an income stream for estate agents but not a major one.
But the move is important because a repossession is a hugely value-destroying activity. It results in fire sale prices; transfer of a house which is highly suitable for its residents to (often) a speculator for whom it has less value; often a period of non-occupation when the property is likely to be damaged.
The preferred economic purpose of repossession is as a threat, to reduce moral hazard and provide an incentive to repay, rather than something that actually happens.
Provided that the banks or government take the opportunity of this extra time to implement some of the measures they have been talking about - local authority purchase of repossessed homes and equity sharing for example - this will be a good thing.
As for the estate agents, there are much better things they could be spending their time on, which would create more value for themselves and other people:
http://www.knowingandmaking.com/2008/09/structured-pricing-in-property-market.html
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You IDIOTS who would repossess after one month of arrears?
UNDERSTAND the last thing the BANKS want is to repossess a property!
And the habit of running a constant family financial debt means financial disaster.
Maybe the banks should pay into an insurance policy, which would cover them for voids of 6 months.
ITS too late now but the government should encourage all of us to have enough money in the bank to cover us for any out of work or other difficulties.
Maybe a TAX benefit for having a float of say £1,000 for every £10,000 we earn would be a good idea for the future.
That way the borrower would have funds for bad times.
IF rates go to 1% then the ability to pay would become far easier.
Common sense please.
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Can't help but think the banks, (and probably the government by leaning on them) are just chasing short term headlines.
RBS doesn't have much to lose, since they are now basically owned by the government and I believe that there is one absolute unwritten rule which the government will adhere to, even at the cost of utterly bankrupting the country - and that is that no taxpayer will lose a single pound if a high street bank goes under.
They have proved this already this morning with the demise of London Scottish Bank where they have said that every account will be guaranteed. A main high street bank going under would engender a collossal crisis. People just don't keep enough cash any more to get through a day or two, let alone a week. The government has to underwite the lot, even if they aren't going to admit it, otherwise it's time to buy tinned foods and barricade the door.
So although extending the mortgage arrears timescale will eventually cost the bank more money, they don't really care. They've got some good headlines and they look like they do care. It won't save anyone from going under, it probably won't keep anyone in their house. After all, if you are three months in arrears now, the economic situation hardly looks rosy enough to find another job does it?
I posted a question last week asking when the tipping point would occur when the banks would admit that there was effectively no point in repossession in the current market. It looks like the realisation that the safety of the banks will be upheld above all else has allowed the banks to come out and say it. After all, it's not as if they are paying the bills any more is it?
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#22 "Small wonder Brown's unlikely to go down in history as anything other than a disastrous and, moreover, unelected Prime Minister."
Well I get the feeling that his mention in history will be along the lines of - "And then there was this bloke....."
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Won't work! Deeper trouble!
There is a system here that's finely balanced and the Gov just don't get it. Firstly there is a nievaty that banks can just start making Billions, with just a little creative accounting, from doing what they've been doing for 100's of years and nothing will go wrong - it broke! Now it's medalling with the ultimate threat - repossession.
Billions are lent out on the basis that if you don't pay you have your house taken off you. Like most punishments there is a deterrent element - you'll be surprised how many people will read 'Mortgage Holiday' into this... there are the Can't Pays, now it's time for the Won't Pays
RBS - watch your cash flow drop like a stone!
Independent Building Societies (who didn't take Gov money) - The goal posts have just been moved for you
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BBC Breaking News!
TV's Bleakley performs last tango
Other TOP stories this Monday morning:
Renaldo defends handball
Sheffield mum has triplets
Starlings prefer Rome to England
Cold weather predicted
Straw surprised
Repossessions up 12% and nobody came...
GC
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Bad news for the Scots as yet another one bites the dust -
"London Scottish Bank has gone into administration after the Financial Services Authority stepped in to stop it accepting deposits."
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#32 - para 1 this is utter nonsense. House prices will continue to fall (jolly good thing) until they reach a price where they become affordable. For most of us this is the point where our income can support the loan needed to purchase the house/home.
para 2 - quite right
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Ian Pearson, the Treasury Minister said that 'he would hold the banks' feet to the fire' to ensure 'better treatment for customers' (shurely 'compliance with political aims'?)
A breath-takingly awful and inappropriate turn of phrase for a politician seeking a useful soundbite and a positive headline. It automatically creates hostility between the government and the people he is speaking to, and underlines this government's reputation for the 'clunking fist' approach to government.
Hang on...I see that the page that included this phrase has just been cut. The clunking fist strikes again? Are BBC sub-editors at this moment being hauled off for questioning?
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Post 30
"you are really having a laugh" etc
Auction prices show the level of drop.
Weve bought 63 houses for our social housing fund at auction.
As proof the prices paid represent an average 48% drop on the previous purchase price.
HAVING A LAUGH????
PLEASE DONT INSULT OTHER POSTERS
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Here's another thought for what it's worth. Since the banks are losing money with repossessions, why not turn it to a good cause and leglislate that only first time buyers can purchase certain properties when they come up for auction?
I'm not talking about all properties - perhaps just a certain category of starter home, which will stop the price inflation caused by larger landlords and developers simply outbidding everyone.
Yes it'll cause a drop in prices in some areas, but if it is only genuine repo properties and only genuine first time buyers, wouldn't that do some good?
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Post no. 8
Does it sound sensible to you that there's a housing 'shortage' when over a million homes are on sale with no buyers??
And this mysterious'demand' that people refer to is a function of affordability, which in turn is a function of GDP and wages. What else can support house prices in the long run? We have had a borrowing binge resulting in a housing bubble. Take away the borrowing and you take away the bubble.
I have also heard this term 'demand at the right price' but how is this different from say Ferraris? There is no doubt very strong demand, everybody wants a Ferrari right? There is no 'shortage' of unsold Ferraris in showrooms and used-car dealership. What will make more Ferraris sell to all those hanging their tongues out, i.e. the 'demand'?? That's right, perhaps a 60% drop in PRICE!
This applies to everything, we become wealthier and our standard of living improves as plasma TVs get cheaper for example, or shoes or bicycles, why should housing be any different? This great obsession with high house prices is surreal.
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No mention of London Scottish Bank on BBC Business page.
Not newsworthy enough?
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Welcome to Japan mark two. The reluctance to draw a line under bad loans prolongs the correction, at the risk of deflation expectations settling in for the long term.
However, with a bit of luck the rest of the mortgage industry will still act competitively rather than politically. By not following RBS, they should gain from the slower decrease in values, and recover more of their bad loans than they otherwise would have. RBS on their side will have moved to the back of the queue at some expense. As usual, it is those gambling with the taxpayers money who feel that such risks are worth taking.
Now the question is, would HBOS have done this as an independent? Who still believes that Darling's "risk analysis" was a ruthless attempt at securing taxpayer value, rather than an exercise in political vanity at the taxpayers expense?
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#23 freecornwall
The EURO.
They will not be able to get that through without a REFERENDUM, will they?
We would be taking on the unfunded pension liabilities of Germany!
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TO bang ON & ON re house prices.
If the lenders stuck to income multiples of
2.5 X main salary 1 X lower salary
we might get to a sensible level of "value".
Houses are for living in,NOT financial HONEY
POTS to borrow against to live an
unaffordable lifestyle.
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Why should I pay for this?
Labours Pre Budget report states that any person earning over £40k PA will be taxed at a higher rate.
So It will cost me, [depending on the amount of people who are facing repossession]
Circa £100 - £300 +
Per Annum in income tax. This money. My money!
Will go to provide a 3 month lifeline to any person facing negative equity.
I will also be taxed to 'bail out the banks' who lent these people way too much in the first place.
My own situation is that I am a professional person in my thirties, earning an average wage. I was priced out of the housng market in 2000.
{When a house I was looking at jumped by £20k in value in just six months. My natural reaction was not to jump on the bandwagon, but to pull away, knowing it was not worth that much just a year later.}
Plus I thought I might have problems with the repayments.
I have lost tens of thousands of pounds because I have had to pay rent.
{Actually, probably far more than the average person facing negative equity will lose.}
{I would love to be able to afford to buy my own average home. Its soul destroying, and you feel you have nothing to offer}
As a potential First Time Buyer, I have been unable to even afford MASSIVELY overpriced one bedroom flats/Bedsits.
And yet I, and the tens of thousands of people in my situation, have to pay for the people facing negative equity to enable them to stay in their houses?
{For clarification purposes. I only earned £40k for the last two years. And this year looks like the recession could damage our business]
It seems Labour, and Gordon Brown will stop at nothing for votes. He knows his only chance to stay in office will come from people already on the housing ladder.
The govermnet, Banks and 'Voters' facing negative equity are in collusion to ROB me.
How else can I possibly view this?
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It's been government owned for a week - the first sign of a non-commercial approach didn't take long.
The trouble is that in public bodies, management want to please their political masters and may be get a gong too. Not sure that is healthy for the long-term.
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Er...this is not completely helpful on both sides.
1) prolonging the time between arrears and repossessions a) increases the overall debt and b) in a falling market might mean that the house is sold for less money. This leaves the bank and the customer with a larger problem of a higher residual debt. This definitely doesn't help the customer
2) because of the above, it is likely that banks will suffer higher levels of bad debt, whioch will further damage their capital position - and how does that help us all?
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I agree that bringing houses prices down to affordable levels as sharply as possible would be far better for the economy than allowing a long, slow decline.
The best way to do this is to convince sellers that prices are definitely going to come down to such levels (say 3.5 times income on average) and that they are going to be forcibly kept at those levels in the future. Government and Opposition parties should explitly state that this this now their long term policy.
This could be backed up by measures to prevent house price bubbles ever recurring. Say a tax on mortgages of greater than 4 times income or on buy-to-let mortgages? Or a commitment that planning regulations on land use will be relaxed if house prices start to inflate again in the future?
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..furious. All this 'headline' publicity about the RBS but what are they doing about the normal people?
There are thousands of very unhappy One Account holders that have been trying to get an answer on when the RBS plan to pass on an interest rate cut following the BoE 1.5% cut in base rate. So far nothing more than - 'it is under review'.
Your good selves at the BBC can help bring attention to the silent majority who might just spend a little more if treated fairly. Looking after minority groups who have been living the life of Riley on credit and now want bailing out, seems to be the focus, but they are unlikely to spend like the government say(!) they want.
But, pass on the BoE savings to the masses of normal cautious people and we might feel like spending a little more. Now 'we' own the RBS it is in prime position to set an example... and pass on the interest rate cut to the One Account holders too, that the BoE intended us to have!
Regards, MyWifeIs ...furious
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49 - Referendum?
Don't 'bank' on it (don't bank on anything at the moment).
Crash Gordon will probably enact anti-terrorist leglisation and have anyone who suggests a referendum immediately arrested for opposing his 'New Deal' from Britain and the glorious Brown future.
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As a small solvent business who has banked with Nat West with for 30 years. I though it amusing to receive an advice booklet from them today entitled:-
" Trading through the Economic Downturn"
It contains lots of helpful advice, mostly good business practice, but no apology from Head Office for their bad business sense.
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#4 Antonio59
Gordon Brown, Alistair Darling or Osama Bin Laden.
Take you pick and in any order.
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Here's the positive side of what Royal Bank has done: it gives those who lose their jobs in the looming wave of redundancies a better chance of getting a new source of income in time to prevent the bank seizing the family property.
Clearly you misunderstand how the mortgage market works Robert.
People loosing their jobs have the protection of their payment insurance.
Its people that havent lost their jobs but are up to their ears in debt that are defaulting. No the people that lose their jobs
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#49 Referendum? No chance. Quote from Barroso -
"I know that the majority in Britain are still opposed, but there is a period of consideration under way and the people who matter in Britain are currently thinking about it", he said.
The people who matter??!!!!
Shurely that SHOULD be us the taxpayer and voter but wait - there is a knock on the door. Must dash..........
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Easy.
If the estate agents are feeling the pinch then let them borrow wads of money from the banks.
Err.
Hang on. We own the banks.
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Well now that London Scottish has gone, will they take that "fine upstanding" debt collection arm of theirs Robinson Way.
I really do hope so, or at least with the FSA invloved Robinson Way may start to abide by the law, when chasing debtors
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Your first three paragraphs read as though ministers would have been in some doubt that Stephen Hester would mould RBS policy as closely as is humanly possible to the government's preferences. And so there will be a huge sigh of relief going round Whitehall that this mega-star of the banking world should have come up with a policy that, apparently, represents the best interests of the bank, and, by chance, is of political advantage to the government as well. And, wonder of wonders, he's done this without any prompting from ministers whatsoever!
It just goes to show how the very best people have the mental capacities to design policy that optimises two, or more, contradictory objectives. And, by the way, isn't it clever of the government to have found one of these for RBS?
I wonder if it will ever occur to the sentiment-manipulators of this government that there are diminishing returns to be obtained from the sort of spin-driven poppycock with which they flood the channels of information? They are, slowly but surely, demolishing the essential faith of the general public in the integrity and good purpose of the ruling authority.
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#51 Lifedaniel34
Your patience and discipline will not go unrewarded. Stay calm.
Either this government will destroy our ecomony in an attempt to deny reality and stay in power or they will be forced to let teh market clarify matters. Either way the housing market is likely to produce falls of around 50% from peak or more if that is what incomes can support in 2 or 3 years time. Check your history books.
You need to be aware that if you have saved a large deposit in Sterling there is a chance as the global depression advances our currency may collapse relative to other major players due to the additional weakness of our economy. The Chinese are hardly going to lend the UK money based on our only security being our over priced houses and our rapidly collapsing financial sector.
UK Personal debt £1.5tn
UK Gov debt 60% GDP and rising fast.
You could consider hedging your savings by opening a euro account and splitting your savings between them. We may end up in the Euro yet.
Remember your taxes and savings are being used to save the foolish and buy their votes. You can afford to remain calm. You have no debts, cash and a job. This is a zero sum game between those in debt who need your cash and those with cash.
Just be patient.
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Plenty of RBS customers out there today thinking there by the grace of.......having learnt that they will be homeless 3 months later than budgeted for.
The percentage of defaulters that have arrears in excess of two months, not three and manage to get back on track is negligable. Therefore this policy basically increases their debt, increases the banks debt and increases the taxpayers debt.
This amounts to another spun con trick by the banks ''at arms length' masters
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This is another nail in the coffin of free market dogma- the real cause of this crisis. The genie is now out of the bottl! Now that bankers are starting to subordinate shareholder primacy to the interests of society as a whole, there will be no going back. I predict that in the same way as we were amazed by the extent of the neoliberal revolution, we will be equally astonished by how far the pendulum moves in the other direction!
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IS
Jacqui Smith
HAVING A
Tony Blair " Bernie Ecclestone " MOMENT ????
LIARS and LIARS
We will find out in a few years.
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#21 alexandercurzon
Agree with you 99 per cent.
Loved your reference to Frau Smit...and how about a mention for Herr Braun ?
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1) The huge sums of money being 'thrown' at the banks - is this an 'investment' (ie there is a real chance that the government will get this money back and even make a profit on it) OR is it just money being given to the banks to try and stop the crisis getting even bigger.
If the former then a lot of the disaster mongers will be wrong as the government will eventually gain from its intervention policies (although I agree with some of other comments that this very intervention is making the underlying problem bigger as people will start to take advantage of the situation) . If the latter then the £700 billion could surely have been 'thrown' at existing businesses in the form of grants & similar to stimulate underlying wealth and expenditure which would have saved the economy much more effectively than £700 billion given to the banks. The banks should have been allowed to fail - the pieces would have been put back together faster than this problem will be sorted.
Clearly no goverment would ever consider giving this sum of money to 'real' businesses
- what a shame as this would have an incredible effect.
2) The comment by eddixon - number 45 - this is a great idea and would really help house prices adjust to proper levels - of course there would be some pain with this too - but that is what all this intervention is trying to prevent but only is succeeding in delaying - we have to suffer some real pain to sort this out and the sooner and faster the better.
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No 10 Paulienash:
'Oh yeah what did ever happen to bird flu?'
You obviously caught it, as it evidently warped your ability to find anything remotely interesting to say. This Peston bashing is boring to read. Go on, think of something interesting to say. Get those brain cells in gear, it'll do you good.
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This means that the depression will be slower and longer than it would otherwise have been.
The Government's strategy is to have a gradual collapse which will prevent too many people reaching the "anger" phase at the same time and the social unrest that would occur as a result.
Once people are in the "resignation and acceptance" phase there is far less likelihood of Downing Street being stormed (something that came very close in the Poll Tax riots). People will be ready to accept almost any suggestion to lift them out of their current mess as they will have nothing to lose.
That is when they will try to get us to join the Euro. That is when competing interests will proffer radical solutions to our predicament. Some of these solutions will, no doubt, involve hurting people.
In fact it was millions of people being wounded and/or killed that lifted the world out of the last depression.
We are a pathetic species at times. It doesn't have to be this way.
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#47 Yes, there is !! It is cleverly hidden from direct view under the headline - " Bank forced into administration"
http://news.bbc.co.uk/1/hi/business/7758117.stm
Hope this helps !!
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I am a professional person in my thirties, earning an average wage. I was priced out of the housing market in 2000.
Labours Pre Budget report states that any person earning over £40k PA will be taxed at a higher rate.
{last year I earned over £40k}
So Labour will tax me an extra, Circa 100 - 300 pounds PA in income tax. My money will go to provide a 3 month lifeline to any person facing negative equity.
I will also be taxed to 'bail out the banks' who lent these people way too much in the first place.
And yet for a decade I have lost tens of thousands of pounds because I have had to pay rent.
I could not afford even a bedsit.
This is a UNBELIEVABLE. Why should my hard earned savings, for my own house pay for you to stay in your house, if you cannot afford the repayments?
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Comment 54 : random_thought
I think that we will always have a ridiculous market in house prices as long as the "value" of planning consent is in private ownership. If we are going to create artificial shortages in this way, we need to address the consequence of turning averagely-prosperous farmers into multi-millionaires through no more than the swish of a pen.
If we could get to a position where the value of a house could be determined from real cost of construction, with the land being no more than a minimal part of this, we'd never again get into a house price spiral where what they're worth now is determined more by the expectation of future price movements than by the cost of construction today.
It's surely not beyond the wit of man to devise a system of land ownership that negates the value-distortions created by the planning process.
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No. 51, unfortnuately your post is spot on
It is daylight robbery.
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Most forcasters predict another 15% to 20% fall?
Not according to the Financial Times, who claim that the property derivatives market is pricing in a further 30% fall.
http://www.ft.com/cms/s/0/408e23ec-bd8e-11dd-bba1-0000779fd18c.html
Of course the markets can be wrong, but people that have to put money where there mouth is when making predictions are betting on a 30% fall.
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OK estate agents will go, but that sector was too bloated anyway, and as RP says, we won't weep for them.
They can go and find jobs elsewhere, as there are plenty of similar jobs selling snake oil, being a hack, in litigation and in banking...
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post 44
more fool you - you should have waited if you are right - looks like you have cost your social housing fund a few quid by jumping in at auction - you should have waited
but good to know you are benching your funds future on some of the dross that goes through some of these auctions - very clever
stick to location, location, location and the long term
also if you have money to spend I know lots of developers who would galdly give you the lot of their stock at 48% discount without going to the auction
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I have a major concern about the banks financial position (no surprise there!).
It is my understanding that the 'sub prime mortgage wrappers' had the effect of forward loading profits so that instead of earning profit over 20 years of a mortgage they were earned in year one! This means no profits left for years two to twenty.
It is also my belief that the funds 'thrown' at the banks by the government are done on the basis that the underlying bank position is massively profitable and they just need time to put their house in order before reaping these massive profits again, repaying their loans etc.
If it was the 'sub prime wrappers' that were generating a proportion of the huge bank profits then they, the government and us all really are in trouble. Any bank accountants out there know if my understanding of the accounting treatment is correct?
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1 The government are still trying to bounce the reality cheques to infinity and beyond and are only capable of lying ,
It is truly pathetic !!
They have been reading too much mine camp and have gone OVERBOARD big time for Adolf 's famous one liner -
IF YOU ARE GOING TO LIE TELL A BIG ONE NO ONE WILL NOTICE .
But at least they are taking my advice-
"IN FOR A PENNY IN FOR A POUND"
and
"ROLLED INTEREST PAYMENTS TO INFINITY AND BEYOND "
and while there is still time they can still sell their overpriced London residences ,that neat little tax dodge they thought they had awarded themselves for their great leap forward in their latest five year plan now going down the pan .
What a performance !
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@76
If they are pricing in 30% then the likely fall will be 15-20%.
they are renowned for over shooting on the downs as well as the ups
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Comment 73 lifeDaniel34
Think yourself lucky you have been priced out. This has saved you losing even more tens of thousands as you have not bought a depreciating asset. If you continue to rent for another year or two you should then be able to buy at the bottom of the market. Meanwhile if you are earning over £40K you should be able to rent somewhere decent, especially as rentals are falling too.
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#49 Toldyouitwould
Do not worry. The UK does not meet the entry criteria for euro zone membership anyway. Gross general government debt is more than 60 percent of annual GDP, thanks to the majority stake in RBS, and the general government financial deficit is more than 3 percent of GDP and with spend, spend, spend policy it will be for years to come.
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19 skynine
You are correct the situation is different in the UK to the US, in the US the householder can throw the keys over the counter and walk away following legislation in 1930's. In the US you can get away scot free, no reference to the scots or our PM intended, it is just a phrase. In the UK any positive sum following the forced sale of the property is returned to the ex houseowner, subject of course to administration and legal costs and charges as defined by the bank, usually thunping, and not subject to discussion with the exhouseholder. Any loss if it occurs is recovered by the bank against the insurance company whose policy was paid for as part of the mortgage package. The insurance company then goes after the exhouseholder. That was the case in the last recession and I doubt it has changed. It is a bit like when action was taken against the Lloyds Names, there is no escape. There is a legal obligation for the banks to recover a fair market value on the property but that is a moot point.
Incidentally if the above does indeed remain the case I would like to hear from somebody in the banking sector why the banks keep bleeting about the risk of losses, because in the above senario it is the insurance company with the problem, unless of course the insurance company can argue that the bank has been negligent or even possibly fraudulent. Now that would be interesting wouldnt it.
With respect to the blog in general. I am not convinced you can define forced sales, ie bankrupty sales as a market value. In a market place normally two parties willingly enter a transaction, that is hardly the case in a forced sale. It is more likely that there is no market at present. No market is in place when dropping the price has no impact on a sale being forthcoming. It is a shame estate agents may gazunder one another out of a job but they are the ones doing it.
The problem in the housing sector is this endless mantra of substantially declining price forecast. Nobody who can avoid it will buy if they can put it off. HMG has in fact done nothing specific to stablise the housing sector directly so it will continue to slide. It is inevitable it overshoots. It is difficult to see any sustained uplift before the GE to carry Brown onward and upward to infinity and beyond, so Brown is just awaiting eviction, quite appropriate really. Public foreclosure on his own bust budget, just takes longer than 6 months.
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Re 54 - random_thought
I absolutely agree (please see my post at 34). However, the Government's economic model is based on high house prices.
So when the value of houses starts to drop what do they do:
1 - Force banks to loan again.
2 - Delay repossession (in the hope of a recovery).
3 - Report artificial property price declines (see #1 - afcone).
We as taxpayers just pay for it!
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> So the brutal truth is that a great
> downward whoosh in prices, the moment of
> catharsis, is most likely to come as and
> when there's a great surge in forced
> selling, which would be the consequence
> of a widely anticipated rise in
> repossessions.
With respect, there has already been a "great
downward whoosh" in prices, all over the country.
I'm not saying the whoosh is stopping, but
it's already pretty loud.
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Post 78
We are content with our purchases.
Auction properties are NOT ALL rubbish.
Re location?? As you have no idea where any of these houses are i find your statement bizarre?
We pick our purchases carefully,most developer stock is very poor & so overpriced
even 48% discount wouldnt be enough.
SAVE your sarcasim for a better cause.
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#72 ishkandar
Thanks for that! How stupid of me not to go ferreting about in the small print.
----
#56 eddixon, #60 organum
We will be sharing a cell then, or will it be an RTA?
Uh ho... there's the door.
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LEND LEND LEND SPEND SPEND SPEND
This is the governments policy.
My daughter has recently received a letter from LLoyds TSB offering her an usecured loan of £17,000. Her income is less than this. and she could not afford to pay the interest or ever pay it back.
Since the financial crisis was due to irresponsible lending by banks and encouragement of reckless spending.
Lloyds TSB relies on taxpayers money in its take over of Halifax. What is the Government thinking of when forcing banks to make toxic loans and to encourage people to spend mostly on imported goods?
Adding to the enormous budget deficit which all of us will have to pay for in higher taxes or inflation (after a temporary fall of fuel prices)
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I have read that oil prices are predicted to start rising again by the end of 2009 due to infrastructure problems within the oil and gas industry. If this turns out to be the case and if the government is hoping that the current reduction in wholesale energy prices will have fed through to consumers by mid 2009, then it is wrong. There is a risk that there is a double whammy at the end of 2009 - energy prices climbing again and VAT returning to 17.5%. Sounds like a Summer 2009 election to me!
In my opinion, increases in the energy costs has been one of the triggers to the current crisis. It has been a major factor in reducing the ability of people to service mortgage and other debt. My concern is that if the general trend is for energy prices to rise over the 20 years then this will act as a serious constraint on economic growth throughout the world; the availability of cheap energy is a pre-requisite for economic growth. We are currently witnessing what happens to the world's financial system if economic growth cannot be maintained. My point is that I do not think that we are witnessing a one off adjustment to the economies of the world. There is a much longer term issue that needs to be resolved.
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#74 - Yes I agree that fixing the planning system is the real solution and would in itself prevent future house price bubbles from occurring.
Even though we are a heavily populated country, there is still plenty of land out there which could be built on - specifically plenty of land used for monoculture farming which has no ecological or amenity value.
Making planning approval automatic for conversion of farmland to housing (unless it is in an area specifically designated as being of environmental or scenic value) would solve the problem overnight.
Much of the present "green belt" legislation seems primarily intent on keeping the "oiks" in their place in the cities, where all available land is being used for building instead of creating green spaces in our cities which would be of more benefit to people and to the environment than inaccessible farmland in the green belts.
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After a little 'joined up' thinking the Government may realise that those saved by the six months repossession life line will be burnt regardless as the interest rates rise to counter the inevitable inflationary period brought about by the vast monetary influx into the economy.
It makes a mockery of the 'prudent' and cautious families living within their means who are required to bail out those not so cautious both now and again in the near future. People and Governments should be seen to suffer the consequence of their actions for without consequences all values are eroded.
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79 Its best to give government the bennefit of the doubt ,and assume that they are lieing fools that only wish to save their worthless careers .The bluff goes on and on to infinity and beyond .
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Robert,
Did you know that, the RBS promise to business re account charges and overdrafts do not apply to its wholly owned subsiduary Ulster Bank which operates in Northern Ireland. Can you find out why customers in Ulster Bank are not given the same rights and conditions that are also applying to Nat West ,RBS other subsiduary.
mariedoe
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life daniel #73
Get used to it. I am of a similar age to you and our generation are going to be asked to pay higher taxes to meet the costs of soaring public debt (including all the off balance sheet liabilities for PFI projects, unfunded public sector pension scheme liabilities and the bank bail outs) whilst providing for our own pensions (the Govt. won't be able to afford state pensions for ourselves when we retire). In some respects, not having a mortgage is perhaps a good thing; many people of our generation also have large mortgages to repay on houses which are reducing in value day by day.
I think we will look back in future years and see our parent's generation as having the best of it (particulalry if they have inflation linked public sector pensions).
I do however believe that it would be immoral for us not to address the issues now and pass this mess on to our children. I think this means pretty tough times ahead with higher tax and real cuts in public sector spending.
I think that we will be forced down this route anyway. The government's forecasts for coming out of recession are, in my view, hopelessly optimistic. They have failed to explain what the economic drivers will be which will take us out of recession. If the recession is deeper and longer than predicted and the government is forced to borrow even more then I am certain that whoever lends the money will require the government to make cuts to the public sector. I also predict that the next governement will be forced to make changes to the final salary pension arrangements of the public sector and at least change the terms of the scheme for new members.
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It's very good of RBS to give their customers six months before the repo letter comes through the door, but lets face it for lots of people it's putting off the evil day.
The problem remains that if you're in trouble RBS have just given you a bigger shovel and said keep digging!
If the bank where to say what's the problem why can't you pay, what can we do to help? Then they and their client would be on a better position. At the moment they are simply encouraging their customer to become more debt laden and surely that doesn't help anyone.
The fact remains that RBS and every other lender are the problem they continue to keep loan sizes small which discourages investors and others to buy, which in turn forces the housing market down. It's as simple as that, the fuel still isn't there, and everybody in the financial services industry hurts, especially those for whom we could have restructured debt!
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What utter jot Mr Preston.
One of the main reasons that house prices are collapsing is the tendancy for potential buyers to wait until the bottom of the market, repossession are seen as this floor.
any reduction in the number of repossessions coming onto the market will mean that the floor will be higher hence ending the housing market crisis more quickly and less harshly than allowing a glut of repossessions in the first place.
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#83 tamales
"The UK does not meet the entry criteria for euro zone membership anyway."
Thank you very much indeed. I find it both reassuring and quite worrying at the same time.
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People complaining here that others less fortunate than themselves AT THIS TIME should be ashamed of themselves. Forget what you went thru if you had a hard time in the past but now you are doing better. I have been thru some hard times too. That's NO reason for crowing.
If you have a problem with some folk being helped take a look at yourself. This isn't Russia. We're British, we're famous for helping others. Don't forget your Christian decency.
Pride comes before a fall. You are sure to have that fall when you least expect it if you wag your finger at others worse off than yourself - however foolish and irresponsible you may think they are. Nobody should be beyond help and redemption.
Repossessions up 12% and nobody came..
GC
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I recommend that all read this:
http://money.cnn.com/2008/12/01/news/ignored_warnings.ap/index.htm?postversion=2008120106
The quotes from the 'Fat Cats' are priceless and, I think, should be a good basis for some sort of legal action against them!
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51 and 73. At 11:31am on 01 Dec 2008, lifeDaniel34 wrote:
firstly don't define yourself by a purchase of a home because you don't actually own the property till you have paid in full the loan you have borrowed, secondly on the wages that you are stating you are on you can very easily find a bedsit, as for the circumstance concerning taxpayers money been distributed in the manner it has, i concur with your assessment.
The problem at hand here is not even property but your mindset, if after careful delibration and taking into consideration market conditions you decided against buying a property in 2000( might struggle with repayment) that been sensible, you defintely could of found that bedsit [unless you back is so against the wall and you broken emotionally], the surplus cash from renting a bedsit could of been reinvested into a mini venture, i.e car boot sale or freelance work etc, at the same token of increasing your income / wealth
if property prices increases 10% year on year and your on near 40k, then why not put in place a plan to make that 10% over the course of the 12 months thats £4000 per year or an extra £333 per month.
one thing i will add and this is a general statement to all bloggers, with so much time and energy spent stating the obvious in many case, why not collectively look to create improvements as small and miniscule as they may be, even if only it is for small community of readers here, what people fail to realise is that on this board, we do have strength in numbers, with individuals from various warps in life, untapped knowledge can only serve a greater good.
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This comment was removed because the moderators found it broke the House Rules.
Robert
You talk about supply and demand in the housing market as the forces that determine house prices and you "assume" that there is much more to go in terms of house price reductions. I think you a wrong for these reasons:-
1. Supply side. Restricting repo's removes "bargains" from the market thus forcing some sellers to buy at current market prices rather than reduced ones. House builders are not building and so supply is actually drying up. House sellers are still resistant to selling at forced sale values and indeed many housesellers are not in the market due to the cost of HIP's. Furthermore some housesellers are now flooding the rental market thus reducing the amount of property for sale and increasing rental availibility. So supply at current market values is going to get quite restrictive throughout 2009 for the above reasons.
2. Demand side. Yes there are those that are not buying because it's safer to rent .....and importantly cheaper. However in 6 months time when mortgage rates are going to be at historic lows and mortgage availibility is going to be some what higher. So the costs of buying against renting is going to change quite siginificantly shifting people out of the rented sector into the buying sector.
So I don't expect further "massive" falls as you elude to in your thesis.
A tipping point is going to come in 2009 when housebuyers realise there are no flood of bargains to be had and in fact it is better financially to buy than rent. And once they see the house price projections for 2010 and 2011 they'll want to get on the band wagon.............so all that pent up demand will come forth very quickly creating the floor and recovery.
The only thing that will scupper the above scenario is a massive increase in unemployment to 3M.
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WHY NO MENTION OF THE HUGE CHANCE OF NEW STAR GOING UNDER LOOK AT THEIR SHARES TODAY
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"Good Guys" don't charge exhorbitant Arrangement Fees! How can banks justify charging almost GBP2000 to allow people access to money that they lent the banks in the first place in the form of taxpayer bailouts?
While also not refunding the disgraceful overdraft fees they charged -
It's like me lending my friend a tenner and him demanding I pay him a quid before he refunds my GBP10... Crazy!
This whole system is out of balance and I fear is in real danger of toppling over in the New Year as negative sentiment continues to gain momentum (and more 30% bonuses are granted and publicised, following Northern Rock's lead)!
Still, at least Britney was appalling on X-Factor, so that'll keep the sheep busy for a while!
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#90 Dontchya know we have all of the benefits of globalisation to help us out?
If oil and gas prices stay low (not that they are low today by histroic standards) then expect to see a number of recourse rich, but otherwise poor, developing nations defaulting on debt repayments - Ecuador has already postponed payments in November.
By a lucky coincidence you will find that UK and European banks have leant this type of customer something like $3,500 trillion. (about 5 times more than the reckless and profligate Americans).
Low energy prices equals more bank bailouts. High energy prices equal some freezing pensioners, plus a generalised brake on UK domestic demand.
The great and the good have implemented a domestic strategy that only works with low energy prices and foreign lending practices that are crucially dependent on high energy prices.
So, everything should work out just fine...
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91 and 74
Forgive me if I am wrong, but you seem to advocating the automatic right to simply build on anything and everything, especially farmland.
It seems to me that the future food supply of the country probably lies in a 'back to earth'/'dig for victory' attitude. We pay far too much for our food, mainly based on the transport and packaging costs involved in shipping things from far flung corners of the world.
I'm not advocating some sort of bucolic 'Good Life' existence wearing a hair shirt and eating worms, but we have to recognise that the present rate of consumption is unsustainable - and not everyone, depite Blair's best efforts needs a degree in computer sciences. Some people are going to have to accept outdoor jobs working on farms in the future. We can not rely on transient workers from Eastern Europe for ever.
Brown's solution to the whole issue of international trade seemed to be summed up in the message 'It's alright, Africa can grow all of our food for us' which is naive, short-sighted, and unbeliveably patronising.
Furthermore, the US style developer's wet dream of 'Desperate Housewives' style suburban luxury is causing huge problems and is failing badly. You simply cannot realistically live in a system where EVERYONE has to get in their car to buy a pint of milk. This is the US system, there are so few local shops, only out-of-town malls.
US planners had so much space to work with and and endless supply of cheap petrol. We have neither in this country. We must ensure that we have enough space to realistically meet the food and social requirements of the country in case of conflict or other problems and must adapt housing policy around this, not the other way around.
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Robert, just to make sure, are you aware that the Land Registry's figures don't include repossessions? http://www.guardian.co.uk/business/2008/nov/30/house-price-index-market-value
I can see the LR's argument as to why, but they should simply release two sets, those without, as now, as those with.
Else they're presenting a falsely optimistic view of the market, delaying some would-be sellers from lowering their prices, and affecting the market in the same way as RBS.
Unfortunately, Brown depends on us thinking things aren't too bad at the next election, so I don't suppose sense will prevail.
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#3:
> Allowing the defaulter a further 3 months to build up > arrears is just going to add further costs to mount up > for the banks.
Actually, people on Job Seekers allowance can claim
interest payments as dole after 9 months. The key
issue is surviving that long. If people can just stagger
along for a few more months, the collapse in prices
would be averted as taxpayers would pick up the bills
for the mortgage, and thousands of families would remain in their homes.
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Re 97 - icantmakeupnames and mine at 85.
I don't like it but I believe that this is the Government's approach to solving this problem.
Hence my petition at #34, which asks the Government to state their aspiration for mortgage lending, so that we can judge the likelihood of lending regulation and reform.
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"You may not weep for them" [estate agents]
I just love the way we British are so good at understatement!
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For what do the letters RBS stand ?
Not really Royal
Nor really a Bank
And hardly Scottish
It should be renamed 'Braun And Liebling's Luncheon Society'....and trade on the stockmarket as .....
The 24,278 fine upstanding citizens of Kirkcaldy and Cowdenbeath who voted for Herr Braun(33.64% of the 2005 electorate) should be given a very generous number of Cumulative Preference Share at 25% Dividend as reward for their prescience and diligence.
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Re 101, michaelpas (see also 51 & 73)
The disparity comes between the average earnings and average house price.
Why settle for a bedsit when you are earning well over the average wage? Surly lifeDaniel34 should be looking at a semi detached, 3-bed in Anywhereville.
Why should lifeDaniel34 be happy paying taxes to prop up a housing market that he/she wants to get into?
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So we all own part of RBS,
So when will it turn its attention to those who are One Account customers.
Under Virgin it always followed rate rises and falls.
Now we've been told since the takeover by RBS this is not the case, we are still waiting for any movement on rates since the Bank of England cut one and a half per cent last month.
Why has the RBS abandoned One Account customers.
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Interesting angle about the market finding its floor... but also consider that the extra 3 months breathing space might reduce the number of repossessions, limiting the number of properties available and keeping prices up through reduced supply.
Putting economics aside, it's great to see a social agenda being included.
Overall keeping people in their homes must be of benefit to society and the economy.
I just don't believe evicting on a wide scale is in any way good for getting the economy back on track.
Good for RBS giving a nod to James Stewart's commendable behaviour in It's A Wonderful Life!
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It sure makes you wonder who are going to be the low risk first time buyers of tomorrow in this debt ridden society.
Youngsters just out of University with an average predicted debt of £17.500 don't seem to fit the bill.
Perhaps those already in work with the debt still around their necks might be considered for a mortgage , some chance.
I wish I had been educated cos we all know the only way to earn a decent income is to go get in debt first, I am a smug B******, guess what, no Uni, no debt, my own roof, some savings earning a little and what is more no worrys.
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Sounds like a sensible gesture and will be appreciated by some but not others.
The directors and senior managers should seriously consider pooling their bonuses received since 2000 into to helping those in arrears. Perhaps guarantee 58% of the mortgages interests?
Did they really earned the bonuses? With our handouts, most of them still have jobs and can still afford mortgages but some of their borrowers do not, indirectly because of what they did and did not do.
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#89:
"My daughter has recently received a letter from LLoyds TSB offering her an usecured loan of ?17,000. "
I'm not defending their wasteful, irresponsible marketing campaign, but just wonder if Lloyds are only offering your daughter the opportunity to _apply_ for the loan, which once seeing her income levels, they would have refused?
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No.64 Thankyou. I do have some savings, and I am going to look into the benefits of opening a Euro Account. I ahve been worried and wondering what to do with my savings. I dont know anything about it yet.
To 101:
The wages I am on. Ive only earned £40k last year, and maybe this coming year. So No. I could not afford a house. And at the time, 2000, no-one had any idea that property prices would shoot through the roof.
In 1999-2000 the kind of property i had set my sights on, suddenly went out of my reach. And I would have struggled with repayments. On the wage i was on at that time.
At that stage, I would not have had to rent a bedsit, and who would have wanted to?
Like many others, whatever did would not have made any diference to my situation.
In 2000 they went up.
in 2001 they went up
in 2002 they went up
etc etc.
Hence, Priced out.
And to tell me that my time spent writing this blog [However small and miniscule] could have been spent organising a way to make funds, frankly sound rather ridiculos.
Everything I have printed about my own situation is is true. There was no solution. Which is why I am not alone in my situation.
You seem to be second guessing me, and attempting to point out what i could have done better. {Constructive oor otherwise] Yet you actually have absolutely no idea about my situation, from the minimal amount of information I have posted on here.
And there are many others in the same situation as me.
As to house price falls:
Ask yourself a fundamental question.
Q. Why are house prices in freefall?
A. Because the market cannot survive without FTB’s.
When all these economists speculate about how much they will drop by. 40%, 60%. What they are really doing is trying to forecast WHEN FTB’s will return to the market. I wont be returning until they reduce threefold
Back to 2000 prices, when this bubble began.
And as an addition. I hold Labour responsible for my predicament. For their total fiscal mismanagement of this country. I have never been particularly political. Never even bothered to vote in the past. But from now on, I will be going out of my way, to do anything I can to stop Labour getting back in, during my lifetime.
As to the future of the housing market?
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#73
"I am a professional person in my thirties, earning an average wage. ....Labours Pre Budget report states that any person earning over ?40k PA will be taxed at a higher rate.
{last year I earned over ?40k}"
Why do you feel so hard done by?
The average UK salary is £24,596
http://www.statistics.gov.uk/cci/nugget.asp?id=285
Perhaps it's time to get a bit more glass-half-full? A positive attitude and caring for those less fortunate than you might be a good start.
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These moves are merely palliatives - designed to take the pain away now. They will, however, cause greater problems in the long run. They may stop rioting in the streets today but when the dust clears there are going to be alot of very very angry people out there - especially as the governments moves merely convert the immediate pain that should be felt by the financial sector into a longer drawn out pain that will be felt by the VOTERS. Unless of course the plan is to cause rioting so that martial law can be declared and democracy will be Officially ignored.
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I feel sorry for the people who sold at the top of the market and flew off to live in oz.
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This is all just puff. One way RBS could help with repos is to pass on the interest rate cut to all variable rate mortgage holders.
They have graciously decided to reduce my One Acccount by a whole 1% meaning they keep the extra little bit of bunce for themselves. There is much disquiet about this with One Account mg holders and are many blogs where protests have been made to Mr Darling, without response of course. Take my situation, an extra .5% cut applied to my mg frees up £125 per month to help stimulate our economy!!
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ah 87 - I have a fair idea if they are for a social house fund
you should have waited if your views on prices are correct which was my point all along - the auction prices are not a good benchmark for you to be throwing into the argument about general house prices
keep sticking your hand in the air the auctioneers will be lurvin you big style!!
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It’s crippling for anyone having a repossession order, an extra 3 months gives more breathing space. I’m sure those philanthropists at RBS/Nat West and other financial institutions just want to help struggling families but, with the current housing market stripping GBPbillions from banks’ mortgage balance sheets, repossessions and fire-sales in the falling market will simply incur real GBPbillions losses on these banks and thus on UK Financial Investments Ltd, so why repossess anyway? Families from repossessed homes will also need to be re-housed by local authorities, extending their already stressed budgets.
#51/#75 - This crisis has been made in bricks and mortar: to support long-term recovery, HMG should significantly invest in Housing Corporation capital programmes, including the purchase of private housing stock for such use, placing greater restrictions on private landlords and ensuring price-controlled secured tenancies for all residential lettings.
Reclaim investment costs from income tax increases.
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@121
You never know how close to the truth your last sentance is
It works for Bob Mugabe though
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114 scotsvoice
If you check online you should find that your rate has drooped 1%.
What gets me is why a) The delay and B) not in full.
You should see the e-mail I got from Nat West when I complained last week. It quoted sub section7 or something of the t's & c's and basically told me tough luck!!!
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Who is going to pay for these extra 3 months of grace? The taxpayer of course! What a great idea!
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Comment 107 : eddixon
I think if you read my earlier comment, you'll see that I am not advocating anything of the sort.
All I am saying is that the planning system has had the consequence of creating a housing market in which an absurdly high part of "value" results directly from, and only from, the granting of planning consent.
So that a farmer merrily making a comfortable, but modest living using land valued at 5k per acre suddenly receives a gift of millions of pounds for doing nothing more than waiting for a committee to grant the right for his land to be built upon. What conceivable social justification is there for millions of house purchasers paying 50% more than construction cost so that a handful of landowners can become multi-millionaires overnight?
Wouldn't anyone with their brain in the right place realise that (a) this is ridiculous and (b) it's not particularly difficult to do something about. It doesn't have to mean an abandonment of the planning system to achieve this. What would work would be the removal of the "value" of planning consent from private posession. It isn't a difficult thing to do.
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Blimey a reply from the Treasury ( my original e-mail also)
thank you for your email and enquiry. It is appreciated how frustrating it is for customers of banks or other lending institutions who have not passed on the full recent falls in interest rates. However, I also hope you appreciate that the Government cannot force them to do so, it is down to those institutions to look at their business and financial situation and to respond to that. I can assure you that the Government is working very closely with lenders on this and has made clear its expectations. regards Enquiry Unit H M Treasury -----
Sent: 20 November 2008 10:20
To: Enquiries, CEU Subject: NAT WEST ISN'T REDUCING MORTGAGE RATES Chancellor, In light of the much vaulted reduction in interest rates announced last week I contacted my ( now our I believe) provider Nat West to find out why they hadn't passed on the interest rate cut to my account. I was informed that no decision hade been made about my type of offset mortgage yet and they couldn't tell me when this decision would be reached. Many people like myself have approved of the actions taken by the Government in this trying time and although not a Labour supporter believe this crisis has been well handled. However this action by RBS/Nat West makes a mockery of the bail out our tax pound is paying for. In the case of RBS the reported figures are £19.7bn bail out with the state getting a 60% stake. How on earth can this reduction in interest rates get the economy moving again if RBS are going to chose as to what products they apply it to. OK fixed rate mortgages are what they are but mine is a variable rate offset and they are quick enough to apply any increase in rates. Looks like the Xmas presents are on hold for now A response would be appreciated but not expected
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The usual fob offs to :
'seek legal advice' or
'you have the right to challenge it in court'
are meaningless when people haven't got money to service a mortgage and have to fight companies para-legals.
For cases referred to debt recovery or Court the money recovered is converted to legal costs and commissions and not paid towards the debt.
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How will this pan out? Well borrowers will stay in their houses longer BUT it will add to their debt so it's hard to see that it's much of a deal for them UNLESS they can sell the property in the "normal" rather than auction market. Surely this is where the Bank's effort should go - in getting people who are overstretched to accept the reality of market prices and aid them to sell cheaply and move on undertheir own steam rather than a forced manner. There may be buyers out there but my gosh with fees being about £3000 and the risk, even probability of price falls there won't be many so sellers will need to be encouraged to be very very "realistic"!
Similarly why should local authorities or the taxpayer of any sort want to buy in to this market to lose our money that way.
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Re 120 - MyNewsReview
I guess the average (prudent) property price ought to be £100K then?
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This will be welcomed by anyone who cannot repay their mortgage through unemployment
A bigger problem will arise because of those trapped by the recession.
The old way of taking equity out of the house to buy large ticket item goods and selling it to buy another to pay the debts off have gone.
In many cases they are unable to sell their homes and are now in negative equity.
Those seeking repossession orders are not only the original mortgage lender but finance companies who hold second and third mortgages.
This is a gesture from RBS but will go no where near solving the real cause of repossessions.
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RE 120
Ive just looked at my post 51 again.
I wrote:
For clarification purposes. I only earned ?40k for the last two years.
Why do i feel so hard done by?
There are tens if not hundreds of thousands of people who feel 'hard done by' because they have been unable to afford a basic bedsit for the last 7-8 years.
Why is that so difficult for you to understand?
As for feeling for other people.
Meaning what?
So you belive that I should be paying tax to bail out the banks and people who are facing negative equity do you?
May I ask. Are you joking?
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Given RBS is owned by taxpayers now one wonders why mortgage providers like the One Account (part of RBS) are still reviewing their interest rates and have stilled passed none of the recent interest rate decrease on the hard working people.
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The market has already been forced down dramatically in our area by repossessions. Most of the drop has been since summer 2008. In the most extreme cases where apartments sold at premium prices to Buy To Let Investors have been re sold on as reposessions at 50% of the price paid 2 years ago.
If reposessions stop then there will be a chance for owner occupiers to sell their homes but only at realistic prices. This will probably be 20% below the peak of summer 2007.
The strange situation of the banks being worried about lending is that their own caution and hard line with reposessions is causing the problem. Reposessed properties are the supply of cheap houses that further forces down the market as sellers try to compete for a limted number of buyers. The lack of liquidity in the market means there are few buyers able to raise the large deposits or who have the squeaky clean credit required to take out a mortage.
A decrease in reposessions would help to stop the fall in the market. In turn giving buyers and lenders more confidence. No one wants to go back to 125% mortgages based on extremely high multiples but sensible lending at 95% should return to the market. The most impottant thing for anyone buying a house is the long term affordabilty. If you are buying property as a home rather than a money making scheme then reaslistic affordable monthly repayments should be more importanat than whether the property is going up or down in value.
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129
So what incentive would there ever be for anyone to ever sell their land? If Farmer Giles has to sell some land to make ends meet to meet the cost of rising fuel and labour costs for example, why should he not be able to profit from it?
Are you advocating that the extra revenue derived from the added value of the planning consent should go straight to the government? This seems like a very soviet style 'reform' - if this is the case, why not nationalise everything?
If you are saying that the revenue should go to the local council, then it would be an open incentive for building for the sake of building, regardless of reason or neccessity. Adding another link in the chain would still result in high prices and would not reduce house proces at all.
The only other way I can see of resolving it would be to set a cap on the value of the land - or a cap on what Farmer Giles can sell it for - but surely this would cause a massive crash in property prices?
If developer 'A', under a new system gets his land for £5k per acre and can build his houses, include a 20% margin and sell them for £100k, he is at a massive advantage over developer B who had to pay £200k per acre last year and who's identical properties are on the market or already sold for £250K (arbitrary figures but I'm sure you can see the logic). By this measure, every existing house or plot of land would have to be revalued downwards by a massive degree - unless the developer 'A' pockets the difference and sells the properties for the same amount but then you have simply shifted the unfair benefit from the farmer to the developer.
Not to mention the fact that if you had purchased your ideal home with 5 acres of paddock and at the stroke of a pen the government decided any future value from that land would be capped, thereby reducing the value of your home, you'd be pretty annoyed. I know I would be.
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Davidtg46 - I agree with your comemnts that the 6 months could make the situation worse but at least it gives people options. The local authorites are already funding peples mortgage through the back door. They will pay housing benefit to someone who is probably renting off a buy to let investor. However in most cases they won't help someone pay their own mortgage. This seems a peverse sistuation. If you save a deposit and buy your own home you are left to your own devices. If you rent you have a safety net. There should be a compromise somewhere so the system isn't abused but it doesn't exactly make you want to leave rented accommodation and take on a mortgage when you could face redundancy.
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#136 toryradio
It would be in their interest to stall. Pun intended.
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4. At 08:37am on 01 Dec 2008, Antonio59 wrote:
"he decided that his priority had to be to prevent his industry becoming public enemy number one "
- so who's No. 1 at the moment if it isn't the Banks ??
I have to add to this in that no-one has done a better job of mismanaging the economy that OUR Government - by constant spin and media pressure it is the Bank's who are the bad guys- not our PM.
WOW - what a superb job of diverting attention away from a list of failing policies by finding someone else to blame - and then show how good you are by bailing them out of the situation that you caused - spin, spin ,spin.
PS - Robert - superb article!
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Re Life Daniel34 and all posts about this. Its all getting a bit personal which is partly Daniel's fault for bringing his personal circumstances into his blog.
However the 'problem' Daniel refers to affects two very different groups of people.
There is one group like Daniel and lots of less well paid people than Daniel who have tried their best to get on the housing ladder and been unable to; they may also have very little debt and be savers. These people are suffering more and more because of the recession and many, particularly I suspect at the lower income levels are now being faced with redundancy due to the worldwide and national problems.
Then there are the irresponsible group who have their own house mortgaged up to the hilt, probably bought to let, have a couple of cars on HP and ridiculously overstretched themselves. These seem to be the group of people who regularly appear on 'popular' TV programmes like Tonight bleating about how terrible it is that they can't afford these loans that the bank forced them to have - it is impossible to have sympathy for these people. People with other loans should recieve no mortgage support - they, rather like the government, have enjoyed the benefits of living beyond their means and now they need to live through the cost. otherwise it is simply 'not fair' to those who have saved to buy a car, pay off credit card bills, only have the house they live in etc etc.
The people with their buy to lets weren't helping those without feel any better when the house prices were going up!
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By delaying repossessions, all that is happening is that taxpayers' money is being used to subsidise one group of people at the expense of all those, like lifeDaniel34 (135), who have been priced out of the housing market over recent years. What is the message to these people? Don't act responsibly and only buy what you can afford, but instead take out a mortgage at ridiculous income multiples, or even better, just lie about your income, because when it all goes wrong, those who acted prudently will come along and save your bacon? What a sad reflection on the current state of this country that so many on these blogs see nothing wrong whatsoever in taxpayers' money being used to bail these people out. With the consequence, of course, that house prices will remain at artificially (taxpayer subsidised!) inflated prices, ensuring that the likes of lifeDaniel34 will just have to carry on renting forever, while paying in tax for others to own their houses.
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Comment 137 : RugbyEstateAgent
I disagree. The value of houses should be closely approximate to their real cost of construction. Compulsorily purchased land at original-use replacement cost, competitively priced materials and labour, and a reasonable return on equity by way of profit for the construction company.
Existing property prices then follow new-builds, although there will of course be blips in either direction for differences in local demand. But if everyone could get it into their heads that, properly maintained, their property's value will keep pace with construction inflation, but no more, then we will puncture the dangerous myth that disadvantages every generation - that there's something for nothing available from property ownership.
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POST 124 CRUNCHED UP
YOU HAVE NO IDEA WHAT WE BOUGHT
YOUVE MADE ASSERTIONS WHEN YOU HAVE NO CLUE.
HOW UTTERLY BIZARRE?
AS i said put your NASTY sarcasim to better
USE.
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Post #4
Outsourcing.
Far more evil than banks any day.
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People are overlooking the blindingly obvious here. As people start to struggle with their mortgage payments they take out loans secured on the house (consolidate your debts into one unmanageable one) and run-up the credit card, clinging on in the belief that 'something will turn up'.
In a fairly substantial number of cases the repossession started because the loan company foreclosed or the credit card company did, not the mortgage company
Extending 6 months won't make the slightest bit of difference in these cases.
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to lifeDaniel34...
It is selfishness and greed that got us into this mess. I'm afraid the way you have presented yourself today makes you no better than the greedy, selfish bankers who orchestrated the problems we face today and in the future. You spare no thought for those more misfortunate than you and in your pursuit of lower prices, would be happy to see thousands suffer the painful consequences of repossession.
You do not disclose where you tried to buy a bedsit but I think few people on this thread buy into the piffle you are writing. We all agree the house price bubble needed a correction (say, 30% to 40%) but I continue to be frustrated at those attempting to talk down the market to unrealistic levels simply for their own benefit.
If you lived to your means you would be able to buy a property right now. Maybe you need to look in a different area? I have a friend who completed purchase, using his single income, of a two bedroom flat on Friday last week. He works in the public sector and I know he doesn't earn as much as you do. He bought in a not so undesirable location in South London.
Surely you've been able to save for a deposit over the last 8 years since failing to buy a property in 2000?
If you truly earn £40k a year, why are you wallowing in your own self pity? There are many people, including friends of mine, who have recently been made redundant due to the recession we are all facing right now. Yet we have people such as yourself complaining whilst earning £15k above the national average. People are losing their jobs through no fault of their own and you sit there happy to watch them fall as long as you benefit from it.
Adults in Britain point the finger at the youth of today, accusing them of the spiralling problems of breakdown in our society. However, when faced with the difficulties of recession, there is growing evidence of selfishness and materialism amongst the older generation. We seem to have lost any sense of British camaraderie and I, for one, am left despaired by our self inflicted descent into pomposity.
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Your should be repossessed and your home should be sold if you cannot afford to keep up the repayments.
Im sorry if this sounds hard.
But the alternative is for the people who have been priced out for nearly ten years, feeling as they would never be able to afford an average home, to suffer tax increases, to pay, to allow you to stay in your property for another 3-6 months.
Why?
No valid economic reason whatsoever.
If you cannot afford to pay now. Chances are. Most people will not be able to afford it in 3-6 months time.
The real reason? Political.
Gordon Brown will probably call an election in 2009. Hoping that you will vote for him, because he has 'appeared' to do you a favour!
Go Rent a property if you cannot afford to buy one! Just as we, the people who have been priced out for a decade have been forced to rent.
Youve borrowed too much, and now you expect to be bailed out? By us? the people who have not been able to afford a property for ten years?
Which means we will have to pay more tax, to bail you out, on top of the tax increases I am now going to have to pay, to bail out the banks as well!
OUR GOVERNMENT NEED LOCKING UP.
They are to blame here.
Robbing Peter to pay Paul is their solution.
And its not a solution at all.
Labour have destroyed the aspirations of an entire generation.
This will not stop house prices dropping back down to 2000 levels.
Nothing Will now.
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A 6 months payment holiday to prevent foreclosure should be a basic right, no big cheese
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Re 133. Total_Injustice
"I guess the average (prudent) property price ought to be ?100K then?"
Perhaps, for a single person paying a 10% deposit. And two people buying a house together, each on 25K getting 4 times salary, paying 10% deposit the average price should be £220k.
By coincidence - According to the BBC, the average price is now around £225k; which would be inline with the above.(http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm)
Including salary increases over a 25 year period then a couple on an average salary of £25k now could be on at least £35k in 10 years (4% a year), and 50k in 25 years. Suddenly house prices don't seem so unreasonable - it's the lack of credit that is the problem.
The other difficulty is for single people who don't want to buy with another person, or those who can't raise the deposit.
Maybe a good government initiative would be finding a way to loan people the deposit, in the same way they make loans to students.
Also, shared ownership could be a good way of people being able to buy without neccessarily needing all the money up front.
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Comment 138 : eddixon
I appreciate that there are transitional problems with removing the "value" of planning consent from private ownership, but there are also continuing problems with leaving things as they are.
It's always possible to make an argument for not changing things, because there are always vested interests in things remaining as they are. But real, objective deliberation involves deeming inaction to be a conscious decision requiring the same justification as change. What's the opportunity cost of NOT dealing with this anomalous situation?
Regarding your arguments culminating in the paddock example, there would, obviously, have to be a transitional compensation scheme - not something for smartarses to make yet more money out of, but genuine compensation. But if the benefits of the reform outweigh the costs of the transitional compensation, is there really any non-selfish argument for opposing it?
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Robert you are becoming ever more opinionated and less factual in your reports. With property we eithr baseour marker on prices on what the Land Registry record or we go with what Agengts felt the seller could 'offer' at.
There is a massive difference between hope and and reality in property and an over inflated 'offer' bears no resemblence to transacted prices, hence these dumb headlines of massive deteriorations in pricing.
Lets get things straight no one cares a hoot for estate agents unless they have to, just as they don't give a fig for most chargeable service suppliers.
Property is not the same in Torquay as it is in Edinburgh so to refer to averages is completely misleading from the off, the only connect is that most propertiues are built of bricks and mortar other than that it is about location and loacl utilities offered.
It is frighteneing that so called high grade journalists are prepared to write utter bull based on warped information just to boost their own ego's rather than tell the truth of what is really going on. Robert you should revert back to your earlier standards and cut this crass cheap tabloid journalism you are now spewing out.
No self respecting journalist would write what you are drivelling out now, and our tabloids make your information look positively retarded.
RBS had no choice other than to do what it did given the pressure on it now. The problem is that the other banks don't know how to change ther operating standards simply because it suits them not to change, further until thoise at the top are swept clear of any boardroom responsibility and totally replaced with new fresh and out of box thinkers and doers we will eb unnecessarily stuck in this rut for some time to come.
We have more than sufficient capacity to move on if this government were to cut the rhetoric and politics and do what needs to be done without the garbage claims of extraordinary times etc.
New labour is shwoing how it was a joke form the start and its only foundations were spin.
Why shoud anyone listen to the government any more when the unelected leader is in anbsloute denial about his involvement and the collapse of the economy. Just as government thinking will not admit the only way to counter this reckless spending is to close up schemes we can't afford.
As for the goon who said had they known how much the Olympics would cost they would never had bid to host them, it just shows how Labour has totally lost the plot and appears to be walking around with its eyes closed!
I just pray that we get an elction sooner than 2010 so we can do the right thing earlier save waiting all that time.
Labour must go now and let those not afraid to tell it how it is lead this country back to normality.
We can't afford and more spin and we can't afford Labour any more.
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post 13!!! have a think about it!
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So, Stephen Hester, the new chief executive of Royal Bank of Scotland, has decided that his priority is "to prevent his industry becoming public enemy number one".
I have a VirginOne mortgage. VirginOne is 100% owned by RBS and, after dragging their heels for 2 weeks, have now announced a cut of just 1%.
RBS 'promised' to pass on the full 1.5% recent cut in interest rates.
Stephen Hester, banker!
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Post 144 excellencefirst
I agree in part with what you say.
However i feel good quality new build should make a small premium.
But i feel used houses should be valued on condition condition condition.
Vast amounts of the nations stock is in need
of serious work.
So i see them as depreciating unless kept in tip top shape.
Which of course bearing in mind the crazy
prices/values few people can keep up with repair/renewal costs.
The backlog of repairs is the next ticking
FINANCIAL bomb.
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Hi LifeDaniel,
In #73 you said you'd earned £40k last year and were complaining about having to pay more tax.
Now you've clarified you earned 40k over two years your post makes more sense.
I understand it must be frustrating not to be able to buy a property and agree that the system needs an overhaul so that everyone has the opportunity to buy a home.
Without getting into politics I'm sure if the US housing market hadn't collapsed, Gordon Brown would have pursued his aim of increasing house building and home ownership.
Of all the parties, Labour have an active social agenda to improve the lives of those less well off. Previously the Conservatives used strong arm tactics to get us out of economic difficulties, it worked but at a huge social cost.
Labour are trying a different tactic and we don't yet know if it will work.
I hope that clarifies things too.
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It's all very depressing, if like me you do think that effective action is possible to see ineffective, and positively harmful action being spun out almost every day.
The spin seems to get all the attention...and the actual measures seem picked almost at random.
The pointlessness (and possibilities of not actually being passed on by many ) of the VAT cut is one illustration...this 'nobody to get turfed out for 6 months'.
What united these two things is a kind of desperation to be seen to doing something.
But if it's given that the whole catastrophe came about because of under priced credit that far too many people just couldn't pay back----handed out in a blanket fashion.
Then, applying scattergun 'solutions' like the VAT cut and the 'Hooray NOBODY gets kicked out for 6 months' idea.... just replicates the original casues.
What is needed is some old fashioned case by case analysis to decide who WILL be helped by a given measure, who MAY be helped and those 'self-certified' sufferers who WON'T be helped.
Without a process of checking like this the "postponment of the day of reckoning" on accumulated secured debt (especially knowing what the unemployment figures ARE going to be) is nothing more than chucking more pound notes through the furnace door.... at least the VAT cut was just pointless as outlined, but may sustain some beleagured retailers who won't pass it on.
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On must be very careful when tampering with the perogative of Reposession.
The option for quick reposession is a fundamental factor in property valuation.
Any leglislation lessening the power of the Banks to reposess will dangerously undermine the property market and increase the downward spiral of property prices to catastrophic levels.
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No. 149 LifeDaniel
Hear Hear. Well said!!
The irony of the government's solution is truly amazing.
There are several rational views from homeowners here, but to those bleating homeowners benefiting from these and other ridiculous measures, how are you better than benefit scroungers from the state? You could be even worse because so many have spent the increasing 'equity' in your homes on cars and holidays. With what face can you ask for help? I am pretty sure that prudent homeowners who lived within their means and have cash savings of their own are equalliy disgusted with your cries for help.
Now 'Sir' James Crosby who ran HBOS into the ground wants a govt-sponsored RMBS conduit to support another £100bn of idiotic lending to our scrounger-homeowners.
He suggests that net lending turning 'negative' is a problem!
I would like to hear a politician with some guts to map out how they plan to keep the hosue prices down once they have crashed so we all enjoy a better life in the long term.
I would like to see fraudulent lending/borrowing practises be punished.
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ref 148:
I really dont mind discussing this with you. However your post is starting to border on personal insults.
As Grimupnorth stated, I mentioned some personal details, so maybe its my fault, however, i am not a regular blogger, and if there are rules against this. I wasnt aware.
As for your entire post. It is entirely based on the falsehood that I earn £40KPA.
If you had bothered to read the first post:
51, or the seond post 119 or the third post 135
In fact if you had read ANY of my posts fully you would see they read:
I am a professinal earning an average wage
And:
For clarification purposes. I only earned 40k for the last two years.
And:
The wages I am on. Ive only earned ?40k last year, and maybe this coming year.
You obviously have not even read my posts fully.
As far as the painful consequences of repossession. Im sure they are, and im sure its a terrible thing to go through.
Its also terrible being told for years and years by estate agents that, you will never be able to own a property other than a bedsit which you will pay hundreds of thousands of pounds for.
I stand by my post 149.
Dot blame me for this. Blame the architects of the mess we are now all facing.
As to your point about how far house prices will fall, [30-40%] and the [piffle?! lol] you suggest I am speaking.
Houses on my street are presently priced at £239,500. Thanks to the Web, there are many sites where FTB’s can now look at the sold price dating back to 2000.
In 2000 they were sold for £80k!! THAT’S AN INCREASE FROM £80K TO £239,500. And that’s pretty average across the UK. Guess what? It was all a financial bubble. These prices are a bad joke.
Lets say we deduct £119,750 from that massively inflated price tag, so these properties are reduced from £239,500 to £119,750 {a 50% cut}
The increase, from £80k in 2000, to £119,750 today, {an increase of £24,750k over 5 years, 2002-2007} would still be a much higher increase than the national long term average.
{ The national long term average being the average price rise, pro rated, over the history of the housing market for the last 30-40 years. }
Even if you halve the present £239,500k price tag, they are still MASSIVELY overpriced !!
{Remember these houses were only £80k in 2000} And this kind of increase is pretty normal across the whole of the UK.
I am merely looking forward, to hopefully soon [next couple of years] being able to afford an average house.
A house as a home. Affordable at maybe 3x or 3.5x salary.
So please [148] do not attempt to put words into my mouth.
Ok?
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Ok 157 Fair Point ;)
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152
I can't help but think there is a bit of a chicken and egg scenario going on with the value of planning permission and the eventual correlation of housing prices.
You argue that the right place for intervention is with the land price to start with before any building even starts, whereas I would ask if the the high land price is a result of the ease of credit rather than the other way round.
The landlowner can't charge ridiculous prices for his 'development potential' land, and the developers won't pay it unless there is something in it for them. The demand for properties is fuelled by easy credit and rising prices result, or do rising prices create the need for easy credit?
Certainly wiser people than me can create convincing arguments for almost any relationship between the causes and effects of the property bubble.
My own personal instinct is that restriction or better regulation of credit would serve us better than a collectivisation of private assets. As we see so graphically demonstrated at the moment, the key drivier of the housing market is the availability of credit. If banks were unable to lend at more than 3 or 4 X income and were banned from exceeding certain conditions (ie taking future share options and bonuses into consideration), then the property market, whilst painful for a while, would calm down to a very steady and predictable - and rather lower level.
This would inevitably feed through to all levels of the market - including landlowners and developers charging and paying wild prices. Perhaps it could be combined with my earlier suggestion that properties repossessed by government owned banks would only be made available to first time buyers?
Would it work? Who knows, I'm not an economist, but it's clear that the previous lending practices must never return. Everybody must be allowed to make a profit - that's one of the basics of capitalism, but how much profit and at the expense of who?
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148:
We seem to have lost any sense of British camaraderie and I, for one, am left despaired by our self inflicted descent into pomposity.
I could not agree more
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Are we ever going to reach the bottom. Not having reached 2003 lows in the FTSE100 is ridiculous. UK business will suffer much more than the US. What sector will replace mining and banking? In the US something will emerge. Is all our hopes resting in the ridiculously over-valued Autonomy Corporation?
If the lows are delayed and some rationalisation doesn't come into the housing market, whereby only those who have a deposit and can afford it buy, then god help us on the next recession. The fundamentals of the Anglo Economies are wrong the market is trying to re-price this correctly. I'm not after a sustained depression just a realisation that those that made massive mistakes during the era of easy credit unfortunately have to go to the wall. Those that have a possibility of paying or turning a profit should be helped in this early stage but not forever.
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I am rather left wondering why there is some difference between losing your home in June rather than March. You are still losing your home.
I wholly agree with those correspondents above who recommend that if you do get into difficulty make a friend at the bank as quick as you can. Also get some good advice starting with the CAB.
After that I am a bit at a loss, for the matter which concerns me is how many homes risk repossession and how many of those are due to exaggerated expectations and how many are due to just bad luck.
I have no difficulty putting out a hand to someone who has had a misfortune as there but for the grace of God goes any one of us, but I would feel very uneasy if such simple human solidarity is abused by the manipulative and greedy. It is clear from the benefit system that there are abusers out there and the last thing we can afford is any more of that sort.
I think the real issue is how far are house prices going to drop, how much equity do people have in their homes, and how much money is available for remortgaging? On all three counts nobody really knows so there is not a sound foundation for policy as yet.
The decision by RBS is a positive step. It must not be the last step and it cannot be a substitute for a fair public policy that supports the innocent who find themselves in difficulties.
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Re 151 - NewsReview.
I understand what you are saying but surely this cannot be acceptable. Particularly, how is shared ownership a solution for anyone?
Ok, by sharing you might get on the ladder but if you have any aspiration of moving up you've had it (as the gap between house types becomes unaffordable - ie 2 bed vs 3 bed).
Furthermore, forcing both family members to get jobs paying £25K is a non-starter. As soon as you start a family you've had it.
Finally, you need to calculate affordability on your current income, not what you might be on in 10 years.
Sorry, but the only truly workable solution is to make housing affordable based on the traditional lending ratios.
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No.19 .............................SKYNINE.
I read your post and have replied late and fast so have NOT read the posts inbetween.
In Europe, if a householder hands back the key. The banks AUCTION the hose in public sale.
The Householder is legally LIABLE for the difference in the morgage price AND interest. and ALL costs related to the sale.
Its a CRIMINAL offence with imprisonable consequences.
In the USA this is NOT the cas and people walk away- able to start life anew.
AND thus kickstart the economy. Free of liability.
Lucky USA eh?
That founding fathers boat looks more attractive by the day...
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What a strange headline. Will there actually be a recovery?
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#88 Toldyouitwould - No thanks needed. Just my daily dose of "good deeds" since I wouldn't be going out today so I can't drag some little old lady across the road, protesting loudly that she was only waiting for the bus !! :-)
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#91 "Much of the present "green belt" legislation seems primarily intent on keeping the "oiks" in their place in the cities"
....not forgetting the NIMBYs who insist that the "oiks" be properly housed but not near them, please !!
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You lot who support repossession at any price should wind your necks in.
If the substrate of robust government economics is stripped away it would be obvious even to a 3 year old that MANY people would struggle to meet their current commitments. If you cannot grasp that logic put yourself in the shoes of a person how loses his job and who otherwise was hard working and met his commitments comfortably.
This government has consistently bragged about the stability of the economy and is now consistently ignoring the wreckage they have created.
The substrate HAS been stripped away, many people ARE now struggling to meet their commitments.
Repossession is used at point of sale of loan as a THREAT - to stop people defaulting. If the economics get bad enough everyone will default sooner - or later. The act of repossession is the enforcement of a contract (such as it is) and it is a punishment most often preceeded by or followed by bancrupcy.
Repossession should not be used AT ALL under the present circumstances against individuals who can demonstrate a robust financial track record up to Q3 of 2008.
When the substratec collapses the people of this country need HELP not punishment.
The same is true of foreclosure and seizure.
It is PRECISELY because of the ruthless practice of repossession in the USA that we ARE in such a mess.
Repossessions up 12% and nobody came..
GC
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Hi Guys
Are we at the bottom yet?
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RE all - LifeDaniel34
I could not agree more with you, particularly Re 161, please my comments in this blog as they reflect your own.
I am in the same position as yourself and whilst I don't wish for the misery of others, no one was ever going to help me.
This is my time, I've waited for it, and placed myself well to buy a home. I cannot feel sorry about this and I shouldn't have to.
People that point the finger of blame at us need to step back and look at the true root causes.
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It is interesting to try to understand the drivers behind the diametrically opposing views expressed on this forum about the future direction of house prices.
I have lived in my current house for nearly 12 years and at the peak last summer its value was over 3 times the price I paid. To me this is ridiculous on the measure that if I was buying now I could not afford my own house! I would also like to have had the opportunity some time in the last 5 years to move to a bigger house but like lifedaniel34 came to the conclusion that the move was unaffordable. I have concentrated instead on paying down my mortgage in the hope that one day I can afford to move to a larger house without exposing myself to undue risks by over-borrowing. This strategy is analogous to not entering the market and saving. As you can imagine I have significant equity and would like to trade some of this equity for a dramatic reduction in prices as this would reduce the trading up gap together with the stamp duty (a tax by any other name) and associated costs. High prices are not in my interest.
Conversely I can also understand that if I had bought 2 years ago and was looking at potential negative equity of many tens of thousands of pounds I might hold a different view.
From my perspective my ability to move depends on the success or otherwise of the governments desire to increase the supply of mortgage funding. If they fail and lenders are more restrictive on their provision of funds then prices will either fall or fail to rise with inflation over an extended period, which to all intents and purposes is the same thing. If the government succeeds in “persuading” the banks to lend more then prices will stabilise nearer to their current levels and eventually rise. This is explained by the Friedman / Schwartz contention that “Inflation is always and everywhere a monetary phenomenon” applied in this case to the housing market – if you increase the supply of money (through relaxed lending) then prices will increase (witness the last 5-8 years). The converse also holds true. I have so far in this paragraph ignored the question of the desirability of the increased debt that would underpin higher prices. My view here is similar to couteousnewcitizen – low prices are better. We would all feel much wealthier if our houses cost £50K rather than £500K
On the question of RBS giving 6 months breathing space to borrowers, I must confess to being sympathetic. Finding a new job after redundancy within 13 weeks is a very challenging target and 26 weeks is probably more realistic in a tight jobs market. We must remember that any foreclosure is likely to be a completely devastating event resulting in financial ruin for those involved, and cutting them a little slack is no bad thing. I speak as one who has been made redundant before but was fortunate enough to find another job quickly. The desirability of the governments fingerprints on the deal is questionable.
On a different note the government is committed to building 3 million new homes by 2020 (a target that will surely be missed as the volume of new builds is plummeting). My question is on what basis has this target been set? There is anecdotal evidence that large numbers of migrant workers are returning home to Eastern Europe as the supply of work (notably catering & construction) dries up. This must surely reduce the overall demand for housing and bring into question the validity of the 3 million target.
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ref 161:
I now apologise as I should have read you posts in more detail.
I don't think your calculations regarding house prices necessarily add up. There are many factors that make things different now (e.g. historically low interest rates, population increases). Now, I'm not saying that prices won't drop 50% (in this current mess, nothing can be ruled out) but the laws of supply and demand will come into play at some point and I think that will be before prices have dropped that far.
Additionally, affordability is a key factor in this debate. Unless interest rates significantly rise, which they of course may do, it is feasible to borrow a reasonably large sum of money and for it to be very affordable - no more expensive than renting.
Lending in multiples of income fails to take into account affordability. No longer can figures such as "3.5x" or "4x" make sense. It should be worked out on a case by case basis, on what a borrower can genuinely afford to pay back. In many cases that may be even less than 3.5x but it is not unreasonable to think it could be more. And, with society moving further towards two full time working parents in a family, affordability is improved due to the dual incomes.
I do believe that a correction of around 35% from peak to trough will be enough to stimulate demand. That would bring prices back to genuine affordability. You can't have something for nothing and I do feel that some people want this with respect to houses.
If the value of the property I purchased in 2006 dropped by 35% from the peak, I'd be in negative equity to the tune of just under £20k. Not ideal but I accept the consequences of my own actions; I chose to buy and I'll live with that. In fact, I'd quite agree with the value of the property at 35% below the peak value (which was, incidentally, quite a lot higher than I paid). If it were any lower than that then it wouldn't make sense. The average London salary is around £40k. I can tell you that taking 3.5x my salary and 1x my wife's salary, then adding on a 15% deposit, would be enough to buy the property at that price. So, if prices dropped 50%, it would not reflect historical trends. Additionally, the mortgage payments would be well within our affordability scale.
I do believe lower prices are good for society as a whole. But I also think we need to consider reality rather than always using the past as an indicator. Well done to you if you are right about a 50% drop but I just can't see it being that severe.
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#122 "I feel sorry for the people who sold at the top of the market and flew off to live in oz."
Yes, don't we just. Think of those poor little poms struggling to survive in drought stricken Oz !! Why, they might have to resort to tinnies to supply their daily requirement of water !!
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Hi 167 - Total_Injustice
It's true that it's tough for people getting onto the ladder without getting an inheritance. We do need to find a way of making housing affordable whilst incentivising people to build them, and not increasing taxes.
I believe if someone inherits a £1m house they should pay tax on it. The Conservatives believe they shouldn't, ie the wealthy should have their taxes subsidised. That tax exclusion will cost the rest of us.
The point about Shared Ownership is that you can buy a propery, no landlord can give you notice and you can make it a home. It's not perfect, but better than renting and you might gain something helping you to 'buy up' in the future.
I agree about not counting on future earnings, but in some respect we have to in whatever we do. It's a reasonable calculation to make and might make things hard at first, but easier later.
And as for choosing a family over a salary - you're right about that too. I guess we need to contribute more in taxes to pay parents more in child care/benefits. Unfortunately no one wants to do that either.
On balance I do believe Gordon Brown has the right set of values and will do the right thing by the people. I just don't see that from the Conservatives who are just very good at being indignant.
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No. 172 GuyCroft
Where dos it end then? The threat of repossession is an essential part of the contract.
What about cars bought on credit? They help people get to their jobs, kids to school perhaps. Should they be spared as well?
There are THOUSANDS of properties availabel to rent at plummeting rents too. If you can't afford your mortgage payments, rent somewhere CHEAP and SMALL.
How many people asked for government help with their deposits and repayments when house prices gallopped away? Those that were fortunate to get in (usually a function of age) then used that equity to move/buy more houses as BTL investmetns.
But there was never any real MONEY in the system, just an inflating house of cards where newly created housing equity created yet more newly created housing equity, created new deposits, new purchases and yet more housing equity.
It is UNFAIR to bail these people out.
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19 & 168 - You are both right in your own way, even though both of you think the other is wrong and in fact both of you are wrong also.
The mortgage company forecloses and auctions the house. It then claims the shortfall from the insurers in most cases these days. It's the insurers that then persue the former house owners for the difference, not the mortgage company.
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#173 thinkb4
"Are we at the bottom yet?"
Nowhere near. Sir Evelyn de Rothschild says it could be two years.
We are in it and it is going to get deeper.
Do not make a splash!
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This comment was removed because the moderators found it broke the House Rules.
#168 traducer - "That founding fathers boat looks more attractive by the day..."
It is said that the Mayflower is the biggest ship ever built !! And it had to be to accommodate all those people who sailed in it, whom the present day Americans claim were their ancestors !!
It also explains the rationale for Thanksgiving. Wouldn't you, too, be thankful to reach terra firma if you were stuck cheek-by-jowl with tens of thousands of people for weeks on end in a large wooden tub ??
Perhaps their current thinking on repossessions is based on the pioneering spirit that if things don't work out right, just leave everything behind and go West !!
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No. 176, randomaccessandy
In the past all corrections overshot in the downside.
There is good reason to believe in the carnage of the world economy, that this time is WORSE than the past. How many experts from Nationwide or the RICS told us that it would not be as bad as the nineties just 3 months back? If ther's onething I have learned, its impossoble to predict human behavious, least of all irrational behaviour in any sort of bubble.
Just looking at some of the drivers of employment in June 2007.
1) Banking
2) All related support services, accounting, law, tax
3) Property, including commercial property/hotels, all manner of associated surveyors, agents, middlemen, investors, senior lenders, etc. etc.
4) Resi property, including estate agents and of course DIY 'developers' improving properties for sale
5) RETAIL - based on unsustainable credit, including cars, shoes, clothes, accessories, etc. and the plethora of related industry
6) Last but not the least - GORDON BROWN - just look at the employment created
I simply CANNOT see where this 'recovery' will come from? We need an entire generation to re-train in actual value creating jobs. So many small businesses' entire business model has to be changed because they have operated for years in an unsustainable British economy.
I can't make predictions any better than the next person. But, be bearish, be very bearish.
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I think that some of the posters on this board give HMG too much credit for thinking about what they are doing.
It is clear to me that HMG don't have a clue what the problem is but they must be seen to be doing something when sometimes it's better to wait and see and then act.
As an aside a little bird told me that all this conflict and misery will be over by Christmas (wasn't that what they said in 1914?).
The good news for me is the unpresidented intervention by the Chinese Govt to try and increase their peoples spending (giving tax breaks for the people). I think this will really turn around world markets and will increase demand for commodities (coal,copper,iron ore etc.) as well as shipping.
I think by following this path the Chinese will at last become the powerhouse of the world economy taking over from the USA who have provided this service until now.
They have a mountain of US Dollars to spend as they please (so long as they spend it). It does mean, however, that the US dollar will go to rat sh1t which will increase pressure to bump up the price of oil.
I think in 2009 we will all live in interesting times.
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#178 MyNewsReview
"On balance I do believe Gordon Brown has the right set of values and will do the right thing by the people. I just don't see that from the Conservatives who are just very good at being indignant."
Has the right set of values?
You are kidding. At this moment "the people that matter (not you)" are discussing the UK Euro with Jose Barroso despite:
"Mr Barroso acknowledged "the majority" of British people continued to oppose joining the eurozone. "
Why do they press on with these things when by their own acknowledgement, we do not want it?
Why do I feel I am being sold down the river again?
I was reassured by #60 that we cannot meet the conditions.
Anyone bet the goalposts are going to get moved?
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randomaccessandy-
Housing supply has gone up due to new members of the EU coming over.
As jobs go or they beleive they can find work elsewhere in the UK then they will move.
This is currently happening pushing down demand removing a large part of the demand
You talk of 2 people working full time as a good thing to boost or stablise house prices but what happens when they have children?
Childcare costs are sky high plus parents want the chance to spend time with their children rarther than simply earn and borrow as much as possible.
People aren't going to work flat out just to overpay for a house and demand will fall as decreasing job prospects means EU citizens move elsehwere in the EU.
Couple this in with banks demanding high deposits and low muliples of income it means the housing market will go down further.
People won't put down a 20% deposit if house prices stand to lose 20% as they all the money they put down will be lost.
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If 30,000 properties are reposessed at verage of £200,000 and an agent's fee of 1.5% this gives £90m of fees. Sounds a lot but as Rober tells us in his article there are 10,000members of the National Association of Estate Agents. This gives income per member of £9,000 or three properties.
Welcome as this may be to describe it as 'a great surge of reposessions and 'a vital source of income' is clearly inaccurate. Moreover to suggest that this will trigger major price cuts i ill thought through as reposessions will not be evenly spread by area, house type or price.
Is Robert
a) seeking a headline
b) failing to do his analysis
c)lacking in the right skills to do the analysis
Answers welcome.
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This is a foolish move as it guarantees much lower recovery on nonperforming assets. I doubt private bond and equity holders of RBS (or lenders to the British government) are feeling warm about this announcement.
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The price of assets can fall as well as rise
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I think we can deduce the moderators go home at 17:50
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#157
There's something strange about blaming US house prices for government failures.
If the government was building our whole economic and social well being opon US house prices don't you think it would have been mentioned somewhere along the way?
Maybe something like this would have been included in one or two budget reports over the last 10 years - "We are embarking on an ambitious new social order that will ensure the well being of all the Queens subjects - but only if US house prices permit".
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Anyone read this:
http://www.marketoracle.co.uk/Article7526.html
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#157 You write total tosh. Yeah Labour really wants to improve the lives of tghe less well off - that´s why they presided over years of massive asset price inflation and relied on lies, spin and deceit to get the populace thinking that this was a sign of progress.
#166 The weather is better in June. It´s all part of the caring sharing Labour policy - only repossess in summer months.
#169 You pose the BIG question. So far it seems all hopes are being pinned on shopping - this obviously can´t work, so no recovery is possible until there is a broad recognition that the past is not coming back.
#173 Nowhere near.
#176 You have probably heard of the expression "If you are not part of the solution, you are part of the problem." The concept of "Affordability" is just bogus ju-ju economics - in part that is what the markets are telling us all. Maybe a more refined understanding of the difference between "demand" and "effective demand" may help.
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#185 "They have a mountain of US Dollars to spend as they please (so long as they spend it). It does mean, however, that the US dollar will go to rat sh1t which will increase pressure to bump up the price of oil."
Actually, the Chinese have a mountain of US debt, to wit about US$2 trillion. If the USD falls, their mountain of debt will lose *real* value !! Therefore, it is in their interest that the USD does not fall until they have, somehow, rid themselves of this mountain of US debt !!
One possible reason the Chinese are happily upgrading to high speed rail systems is that they may pay for them with some of their US debt instruments !! And since it is a national necessity to have high speed rails to cart their hundreds of millions of people thither and yonder, this is the killing of two birds with one stone !!
Furthermore, the *real* price of oil will not be affected by the rise or fall of the USD since more and more producers are pricing their oil in Euros !! Therefore, the price of oil in USD is relative to the price in Euros !!
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I'm Impressed! But I'm still dumping RBS my savings are leaving Byeeee!
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175: I wish everyone in your situation saw the situation with the same clarity as you do.
176: When you say 35% from peak to trough. Im assuming you mean the figures published by the Land Registry? It was reported recently that the Land registry figures are plainly innacurate. They did not take into account Auctions or repossessions.
But Auctions are the closest you can get to the definition of open market value....
Most Estate Agents look at sites like propertysnake to get a clearer picture of their local figures.
The average reduction an estate agents expects to recieve, as an offer on a house is 10%
On a repossessed house it is 25%
Many people who have been repossessed over the last few months have found this to be the case. [And in some cases, teir house has gone on the market for more than a 25% from peak, and still not sold] And they are angry with theyre lenders because they believe the bank to have repossessed the house from under them, and to be trying to sell their property for a lot less than its market value.
188: Of course reposessions will, have, and are triggering major price cuts!
161: I got my figures wrong here, what i meant to say was:
Houses on my street are presently priced at ?239,500. Thanks to the Web, there are many sites where FTB?s can now look at the sold price dating back to 2000.
In 2000 they were sold for ?80k!! THAT?S AN INCREASE FROM ?80K TO ?239,500. And that?s pretty average across the UK. Guess what? It was all a financial bubble. These prices are a bad joke.
Lets say we deduct ?119,750 from that massively inflated price tag, so these properties are reduced from ?239,500 to ?119,750 {a 50% cut}
The increase, from ?80k in 2000, to ?119,750 today,
{an increase of ?39,750 over 5 years, 2002-2007}
would still be a much higher increase than the national long term average.
{ The national long term average being the average price rise, pro rated, over the history of the housing market for the last 30-40 years. }
Even if you halve the present ?239,500k price tag, they are still MASSIVELY overpriced !!
I would predict circa 55% to 75% drop [in some cases] from peak to trough.
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Comment 175 : opinionsofmine
Excellent post.
I think the most telling impression I get from what you write is your insistence that it is your responsibility to arrange your affairs in a way that gives you the best chance of the outcome that you want.
What Mr Brown seems to be saying is that this outlook is not the way he would like people to structure their lives. His view is that people should follow the lead given from the centre, because self-preservation is actually counter-productive, and, on average, people will be worse off if they follow this route.
The difficulty Brown has, and this is largely of his own making, is that very few people actually have any faith that he has either the ability, or the intention, to deliver on his implicit promises. Genuinely capable people are happy to be judged by their achievements. They have no need to take credit for things that are not of their doing, nor do they need to hide in the shadows every time something goes pear-shaped. He has a very poor track record.
For an argument about the inefficiency of self-insurance to make any progress, the over-riding requirement is to have confidence that the insurance company will deliver on its promises. Brown/Labour's credibility has, I'm afraid, run out of gas.
Comment 184 : couteousnewcitizen
Another excellent post.
Like you, I just can't see where the recovery is going to come from. We hold no competitive advantage that can be brought to the fore in any value-creating sector of the economy. There's been massive amounts of mis-investment that will actually be totally useless to us in the recovery.
It's a complete shambles, and the only way we can improve the future is to accept that there are things to which we've become accustomed that will have to be disposed of.
Living a 50k lifestyle on a 40k income leads to disaster - living a 40k lifestyle on a 50k income doesn't.
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This comment was removed because the moderators found it broke the House Rules.
According to the law of supply and demand house prices should be continuing to rise, or is the population of Britain not actually rising, with more people chosing to live alone and an ageing population, compounded by new house building being woefully inadequate(especially in 2008 and 2009).
Propoganda, propoganda, propoganda.
Come on confess, you rent a house don't you, Mr Peston?
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What is a recession but a negative spiral of loss of confidence followed by reduced demand leading to unemployment further loss of confidence and so on and so on.
There is spare capacity in the UK and the global economy for growth to continue, moreover there is no reason that global growth cannot continue ad infinitum, until the sun stops shining at least. This does not need to be as catastrophic as is being talked about, we need to start building confidence before it gets to far.
The lower interest rates fall and the bigger the downturn, the bigger the inflation problems will become 2-3 years down the line.
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Although no lover of 'capital' and 'the market knows best' I've developed a respect for Robert Peston's obvious knowledge and honesty.
That said, his anxious requirement for re-possessions to boost the housing market is,
apart from being goulish, baffling. As baffling as Osbourne scoffing at the 2.5% VAT cut as an insignificant 'drop in the ocean' then arguing that an increase from 17.5% to 18% would mean the end of life as we know it. What's the use of a huge pool of 'cheap' re-possessed properties when there are not enough mortgages to buy them?
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#198 "We hold no competitive advantage that can be brought to the fore in any value-creating sector of the economy."
Actually, the knowledge sector is still quite competitive if only the Brits are not so loathed to invest in this sector. Unfortunately, successive Politically Correct educational regimes have virtually destroyed this as a major sector, with "graduates" that cannot compete on an international level.
"Living a 50k lifestyle on a 40k income leads to disaster - living a 40k lifestyle on a 50k income doesn't."
Didn't Mr. Macawber say something to that effect ?? :-)
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here's an example prepared earlier:
GBP 100,000 debt
GBP 19,000 statutory interest
GBP 18,500 trustees remuneration
GBP 10,000 trustees expenses, legal fees, other
GBP 4,500 VAT
GBP 40,000 DTI fees
its called the pound of flesh strategey
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#73, quick advice for anyone who is not either mentally retarded and/or complete spendthrift waster - Leave the UK. It's history, the damage Brown has inflicted will take years if not decades to repair and the GBP has taken a new downwards trend.
Just remember that virtually ALL the "growth" of the Brown years has come from public sector spend, financial services and house price fuelled spending. See any of that coming back soon?
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#200, RP is almost certainly an owner and so all of this "need to reinflate the housing market" is simply talking his own book, coupled with being a conduit for leaks from the Treasury - which as they are not embarrassing to the government( they should be... ) is clearly NOT illegal.
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#198, I wish i had your confidence in people's ability to place blame.
With the press mostly parroting Crash Gordon's claims, he has tried to palm off the blame onto:
1) Banks - who are mostly the **Victims** of the current crisis. If there are cases of fraud you can bet it was against the bank not by the bank.
2) The US, yep nothing to do with him. Weird that a bubble economy was ALL his responsibility when the going was good but suddenly he is a hapless victim of what those nasty Americans were doing.
3) The "lack of regulation" - which apparently is the Tories fault despite the current regulatory setup being completely home-grown by Mr GB himself. Never mind that structured products are a result of regulation and that retail financial products such as mortgages are **heavily** regulated.
4) "Free markets" - despite his heavy, heavy intervention into the economy over the last 11 years funnelling people's money into property by many different regulatory, monetary and fiscal changes.
As usual Labour screws the economy and it will be the Tories who have to pick up the mess - with Brown no doubt claiming that somehow he was responsible for the recovery, assuming he doesn't simply arrest all the opposition.
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#179
Depressing response.
Constructive decision making is needed not the courts' rubber stamp in the present situation. The problem with imposing the threat of repossession is that is has no risk-sharing element. The transaction of a mortgage is of two way benefit, lenders make huge amounts of money on the interest on these loans, they should share the risk. I campaigned for just this kind of risk sharing in the 90s and now the idea of fixed rate mortgages is commonplace and quite right too.
I have been calling for a moratorium on repossession and foreclosure for a period defined at, say 6 months for now.
Despite what you say there is an incentive for responsible people to actually pay their mortgage otherwise it will never be theirs because - on death - the deeds will not pass to their family. For those in real difficulty a round table discussion of income against outgoings is all that is needed, everyone has traceable financial records, an affordable payment deal can be swiftly reached and updated periodically. I should have thought the socio-economic benefits are pretty plain.
It's nonsense to suggest that folk who cannot afford their current payments should 'just go and rent'. Why the heck should they have to? Be reasonable. Chucked out your own house, credit rating at zero, quality of life wrecked? You think that is a good thing? Mercifully, despite their lack of action on a moratorium, the Govt tends to disagree and is, eg: already forming plans to make it easier for council TENANTS to BUY their houses and quite right too.
Renting is - proportionate to the quality and size of the property - vastly more expensive, deposits, legal fees and upfront payments grow all the time and the rentals take a hike every time there is an economic downturn. Growth industry. Unless you are dripping with cash (in which case you don't need to rent) it is a thoroughly miserable and draining business to have to go through.
GC
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#186 ToldYouItyWould
" At this moment "the people that matter (not you)" are discussing the UK Euro ...... "
Why is 'discussing' things so bad? It's like the discussion of 18.5% VAT caused a furore..! It wasn't implemented so effectively ruled out.
Isn't it good that our elected political parties discuss things?
Let's use our brains, discuss options, look at ways to resolve problems. We can throw out the things that don't work and push ahead with things that do.
Otherwise you're just burying your head in the sand.
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208-Guycroft
If lenders had to wait for borrowers to die to get their money back, there would be no lenders. You seem to find it difficult to understand that people like me are not happy to subsidise others so that they can continue to live in better and bigger properties than I live in myself.
Under your scheme, everyone would try to buy a super big house in a lovely area on borrowed money, borrowing as much as possible from whoever was stupid enough to lend it to them, then default on the mortgage and live there until they died, with no hassle from anyone.
People who borrow money are legally obliged to repay it- that is the contract. If you use your home as security for the loan, you get a lower interest rate than if you didn't. Have you never wondered why that is? On your scheme, people would have to pay close to credit card rates to buy a house, because the security on the loan would be worthless.
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#207 Blacksheep
"As usual Labour screws the economy and it will be the Tories who have to pick up the mess - with Brown no doubt claiming that somehow he was responsible for the recovery, assuming he doesn't simply arrest all the opposition."
Good comedy, but doesn't really bear any relation to the truth.
I'm hoping for a progressive political system in the UK. Just as the US politics has been revitalised we can aim for the same.
Perhaps both Labour and Conservative supporters can put clear-thinking and sensible arguments together rather than relying on soundbite comedy?
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It is interesting to note the sanctimonious rubbish trotted out at the beginning of every recession.
Not everone was brought up with a silver spoon in mouth, not all taxpaying hard working young families have the luxury of saving whilst providing those more fortunate with low cost competitive goods and services.
There is a bottom to this market and it is becomming increasingly overcrowded with greedy vulture funds looking to take advantage of the missfortunes of others evidence is irrefutable auctions and estate agents know that at a certain level there is demand. Most vendors just choose not to sell at this level which is their porogative.
Most buyers are achieving yields north of 8% and that will be their sole consideration we are entering a new era where the numbers of transactions will be lower and prices will not be based on the income (first and second time buyers have been priced out of the market because of the deposit requirement) instead we revert to Ricardos law
and the 5% principal.
We can look forward to more institutional landlords by accident and design and a lower rate of home ownership.
The cost will be in terms of economic growth no aspiration for a large capital transaction, no increase in capital appreciation, too many savers no pensions and no entrepreneurial innovation
congratulations to the doomongers this is your future
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How can you avoid bankruptcy when stuck in a bent family law system:
1. Lawyers learn your children's name and then say you can not see them unless you spend a couple of years in court, (so they can get a BMW)
2. Property and assets are transferred by Judges
3. Legal Costs are charged against the property
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come off it #210
"Under your scheme, everyone would try to buy a super big house in a lovely area on borrowed money, borrowing as much as possible from whoever was stupid enough to lend it to them, then default on the mortgage and live there until they died, with no hassle from anyone"
Don't misrepresent me to feed your bitterness!
We all know that those days are gone and it is categorically a) not going to happen like that and b) categorically not what I am suggesting.
"Anyone stupid enough to lend it to them?"
You seriously still think there are people out there who would either borrow or lend on a grand scale after this? Wow, you are well out of touch.
GC
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options left:
Jail
Death
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#211, I thought the UK had a "progressive government" under Atlee for around two years before it went bankrupt....
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#208, it's called a liquidity cost. Renting ties you in less tightly to a particular property, that able to switch out at a particular time no matter what has a value. As does having no risk of negative equity. That's why renting should be more expensive.
Again the unpalatable truth is that sooner or later these debts will become due. If you think it is somehow socially just that people who didn't buy homes - and I know plenty of people who didn't - should pay for people who were irresponsible then i guess we must have a different copy of the Oxford English Dictionary.
We have seen what the cost of trying to put off a recession is - we could have had a lighter shallower one in 2002 but our government put in a massive fiscal stimulus and cut monetary policy and put the day of judgement off, just like it is trying to now.
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#214, why wouldn't they borrow? The government is bailing them out by devaluing their debts and forcing the banks to lend more to them. What really is their downside? And if you won't be kicked out for at least six months why would you pay your mortgage on time? Take those payments and stick them in an Icelandic bank - after all the government has promised to bail you out if making over 2% above base didn't ring any warning bells.
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#212, no the capital will be no longer be diverted to unproductive housing speculation. Is some REAL growth actually such a tragedy or you like living in a country where it's major wealth generation is real estate bubbles.
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#208 guycroft wrote: "It's nonsense to suggest that folk who cannot afford their current payments should 'just go and rent'. Why the heck should they have to?"
Because as you say, they cannot afford their current payments. Is that not reason enough?
Why should they have something which we have already established they cannot afford? People are only entitled to the property they can pay for, and getting their neighbours to chip in for the mortgage is not a reasonable expectation.
In these circumstances the best thing to do would be to rent and let someone else take on the asset price risk during the downturn, then buy something affordable the way people used to before the boom-bust cycle was repealed.
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Blacksheep, I have finally found one of your posts which includes some sense (219). No rational person wants bubbles of any kind to detract from the kind of public and private investment decisons which benefit us all over the long term.
There is probably a case to be made for quick repossession of buy-to-let investors' property portfolios, and some of the more foolhardy private homeowners may also merit similar treatment.
A large number of repossessions in the past, however, have been caused by people coming off low fixed-rate deals being faced with very high variable rates.
Even with official rates at 3%, some lenders seem to want to peg these at 6%, which seems a bit harsh, and counterproductive for both them and us, the taxpayers.
I think it is these kind of potential defaulters who ought to benefit from any help / pressure the govt can manage.
With official rates about to be cut again, it shouldn't be too much of an inconvenience for lender to offer standard variable rates of 4-5% to existing customers (nb. no return to crazy low fixed-rate deals for new customers only).
Those who cannot afford repayments of 5% are going to be in trouble, unless this is caused by (hopefully) a temporary situation, suh as redundancy.
I don't think anyone wants to return to crazy low mortgage rates and lending criteria such as those which led to the bubble (though you persist in blaming it on Brown, who also no doubt forced poor old Citi etc. to pursue a rash lending policy in the US).
I have yet to read any post asking for 105% mortgages to be brought back, or even 95%. What needs to happen, however, is for lenders to take only a sensible and reasonable amount of profit margin from their borrowers, and to make remortgaging easier (smaller fees, etc).
Cameron and his chums would like to leave it to the market believing, as they still do, that it should be allowed to see mass evictions and repossessions, which allow a few vultures (funds) pick up the resulting bargains.
That's his 'plan'. Let the Bullingdon boys, and the hedgie spivs who fund him, get richer, while plenty of oiks get repossessed for the sake of rebuilding banks' balance sheets via extortionate mortgage rates. A return to Victorian values.
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GuyCroft
Your aim is clearly to be sensible and compassionate. Please do not extend this to the hard world of a business transaction like a mortgage, where you basically call on renters/savers to bail out the feckless, the greedy, the stupid and the irresponsible. If YOU don' mind, find a neighbour in trouble and burn your savings reducing their mortgage.
There are enough posts for me not to repeat any of the pitfalls that will inevitably follow your suggested methods of dealing with this. Taxpyaer help that maintains the housing bubble is unforgivable.
Save to say, YES, they should 'go and rent'. I have rented for 8 years, lived in a beautiful AFFORDABLE (for me) place in a location of my choosing which i could never afford to buy anyway. I have watched with a mixture of pity and bewilderment as young people mortgaged their futures away chasing this dream of 'home ownership' which was also a dream of getting on to the 'ladder' before it was too late in order to 'make money'. Al those who purchased after 2001 will probably end up in negative eq, that too in nominal terms in a very inflationary period.
These rising house prices add no wealth to the uk, they simply represent the scandalous transfer of wealth from young to old, from workers to the retired. It has GOT to rebalance, otherwise you will see the same resentent of the old that you see in germany in the healthcare system for example.
Ironically, it will hurt many young people, but what is the alternative? Perhaps people will finally learn not to over-reach themselves chasing bubbles.
Let's jsut repeat that for the purposes of no. 212 'housingtroll'. This desirable 'capital appreciation' you talk off adds a grand total of NOTHING to the UK, it is simply a transfer wealth from those at the bottom on th house of cards to those at the top. It creates more tax for GB, directly contributes to rip-off Britain, making average employees unnecessarily expensive to hire because they have to pay these ridiculous inflated housing costs.
High house prices are a curse, let it crash and then KEEP it down.
The best part is, when it goes up, one still buys in 2007 for 3 times the price of 2000, the SAME house. Its hardly an upgrade from a Ford to a Ferrari. All that exta expenses is money that would ave been spent on other things stimulating the economy. Your post #212 Housingtroll suggesting that this is bad for the economy, i cannot understand in the long term.
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Post 55. Good news for you (and me). RBS have reduced the rate on the One Account by 1%. Not by 1.5% I know but good enough. Maybe this was triggered by the government ownership. I rang every day since the cut was announced and listened to the constantly changing (but still the same content) recorded messages until finally they came up trumps.
I am keeping track and we are now 1% down in total (based on their 'tracker style' rate adjustments of the past). Could be worse I suppose.
Personally, I think it's a good thing for repossessions to be held off until 6 months' arrears have accrued. I'm sure any house owner that doesn't think so can elect to be repossessed earlier. If I lost my job I would certainly appreciate longer to get another. As I am married with no kids I wouldn't be able to access any benefits to speak of so this would surely be a boon.
Robert, trust you to come up with a convoluted reason why this announcement is a bad thing!
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And since tax-payer help is so high on our the agenda here amongst some posters, what say we 'even out' the playing field here by also offering tax-payer help to those wanting to buy but who have not been able to save enough money for their mortgage deposit?
I could use a 100k top up to my savings very nicely thank you. It will help me and others buy an inflated value house, arrest the fall in house prices and help those in negative equity, as well as mortgage lenders, estate agents and all the other jokers in this bubble.
Is there ONE blogger here who can demonstrate why my claim to taxpayer money to help me buy a house is any worse a solution to recommending taxpayer help to those already on the 'ladder'
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Whislt RBS seem to be telling everyone that will listen that is is doing all it can to help its customer, then try having an offset mortgage with them. Having told the world that it was passing on the full 1.5% interest rate cut to its customers, I was horrified to learn that my mortgage would not get the cut. Every single other time that the rate has went up over the last few years they have increased my payments. This time when it comes down, they have decided not to pass it on. When I called them the call centre said the panel have yet to decide if they will pass on the cut, a full 4 weeks after the last base rate cut. No one in senior management were avialable for comment. I am led to believe that over 50% of RBS customers have an offset mortgage.
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To all those who disagree with me (courteously/sarcastically) on the issue of repossession - no worries.
I will assume you are all Michael Howard 'hammer them in the courts' style supporters and, having read the same_old-guff from all of you that will make me feel a bit better.
I will console myself in the knowledge that you here are few in number compared with the number of folk who have already gone thru this Dickensian process this year (and previous years) and will in the future and I know who they'd agree with.
Repossession would not be SO bad if it didn't taint you for life and wreck your credit record and almost invariably lead to bankrupcy too but of all the many people I know who have been thru it with one exception (a man who made enough money to pay cash) even 20 years on not one has EVER succeeded in gaining a mortgage again in his own name.
Y'all think that's a good thing, I guess. I happen to believe there is a better way to tackle financial problems when brought on by INEPT government whether it be Sir John Major of Family Values or Gifted Gordon and that foreclosure, court orders for indebtedness, warrants of execution for debt, repossession et alia all come from and more rightly belong - in the Middle Ages.
GC
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No. 226 Guy Croft
Agreed on inept government.
However, this is one of the greatest of democracies. Does it not bother you that the politicians are singing from the SAME hymn sheet as som many members of Joe Public who want their recklessness tobe bailed out by someone else?
If the people don't learn, directly and harshly sometimes, how will they vote for sensible people next time round?
What makes you think that a repossessed family's trauma is any greater than a family of renters stuffed into a cubby-hole paying someone else's mortgage and who can eb evicted on demand? They face the SAME job pressures due to possible redundancy, etc.
Why not help them, as I suggested, by giving them cash deposits to buy houses? Isn't this what Brown is trying to do anyway?
I do at many levels admire your sense of compassion/fairness, but can you perhaps extend it to non-homeowners?
I have seen a much harder life and hardship around me thatyou will never understand. I can tell you however, that the UK cannot AFFORD your noble intentions.
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227.
Guy, you'll never convince these 'why-oh-why...' people who seem to have so little self-knowledge.
They don't seem to believe, following their arch heroine, that there is any such thing as 'society', so who cares if a few hundred thousand families are booted out of their homes, often for a pittance (especially in banking terms).
If this crisis gets really nasty, as in hyperinflation, riots, etc., it will quickly become apparent to all these 'alright, Jack' merchants that we on this small island are interdependent, and only those who are prepared to band together will survive. There'll be no place for 'what's mine is mine' then. There shouldn't be now.
I am willing to pay a bit more tax, so that others don't get repossessed so easily- this is my and all of our interests.
I don't care that it was the banks who caused the problem, I would also like them to be strong and profitable, so I don't even object if they rip us all off just a little bit.
I would like to see some ex-directors face charges though.
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No 228, the banks didn't CAUSE the problem, they did indeed facilitate it, and any criminal or fraudulent activity by bankers and borrowers should be investigated. But let's be clear, borrowers caused the problem.
Why is no one responding to my question? Why not fund the first time buyers as well, along with existing homeowners? With ppl like you and guy willing to fork out tax, it shouldn' be too bad.
I honestly believe that a combination of factors, favourable post-war demographics, borrowing binges, etc. have led to a value-system here which is indeed very compassionate.
But times change, pensions are unaffordable, (private and public), this government's deficits will surely cause the pound to plunge and create hyper-inflation and misery all around, and riots as you mention.
Perhaps it is your ways leading us to those riots, an my ways instilling personal responsibility.
Lastly, EVEN if we do go with what you say, please extend it to buyers, not just owners - fair?
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229
When lending say 150K to buy a 1 bed flat, I would expect a lender to ensure that the buyer could repay the loan etc.
When buying a shed load of packaged-up loans from US investment banks, I would also expect UK banks to check the quality of these US loans.
I would also expect banks and their senior directors to monitor and control both the quantity and quality of their exposure to the global property market.
Yes, some overstretched borrowers and buy-to-let merchants are also to blame to an extent.
If this problem was confined to Britain I'd be more inclined to blame our national binge-psyche for it.
The fact is, however, that it's a global banking crisis, and for that the major banks of the world are chiefly to blame.
The size of the banks' directors' errors on property / risk management is surely negligence at least?
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"Families booted out of their homes" - how melodramatic. They can rent, like so many do. Renting does not damage society. Their claim to ownership should not be achieved at another's expense just because they have a good story.
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230
Agreed, it is bordering on the criminal in many cases, where bankers pushing CDOs to gullile investors actually knew they were a pile of doodoo.
But NOBODY got it, not you, not me, not the credit rating agencies, not the governmetns and not the regulators.
So we are where we are.
If we want to 'spread the pain' which is fundamentally what we are doing, i.e. letting the taxpayer's broad shoulders take on individuals' suffering, can we not extend that to non-homeowners. Where's the Great British sense fo fairness then?
Like it or not, you and GuyCroft will end up pandering to a small over-borrowed and over-indulged section of the middle classes, whilst savers, pensioners, renters, students and of course the poor will SUFFER with high nominal house prices denominated in a worthless pound sterling. Do you agree?
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231.
If they have no bread, should they eat cake at our expense?
Repossess those made redundant, it's the only language they understand.
If it isn't hurting (them, not me), it isn't working.
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They have been eating cake for the price of bread for the last ten years, now they can have bread. I am not about to fork out the difference and buy them cake when bread is all I am getting.
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234
The vast majority of those who are likely to be repossessed have not been 'eating cake' for 10 years. They simply happen to have been made redundant. Construction workers, etc.
The irony is that if these people's houses are repossessed you (and the rest of us) will be forking out so that buy-to-let landlords can 'eat cake' at our expense, as the poor souls are forced to rent the Landlords' mortgaged-to-the-hilt properties, at extortionate rents (often more than their mortgage repayments were).
Still, the buy-to-let mob are just demonstrating good business acumen. Just like the bankers used to.
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it was an honest mistake, doesn't everybody want to buy some institutional funds costing millions, or own japanese stocks and a swiss bank account.. it sounds cool don't ask me why.
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Dear Robert,
Isn't it interesting that RBS announced this 'headline grabbing' move to extend the repossession period on the very same day that the media should have been focussed on whether the banks implemented the full 1.5% cut in mortgage interest rates from 1 Dec as they promised in their breakfast meeting with the Chancellor on 7th November?
The BBC reported on 7 Nov that RBS/NatWest and Nationwide had promised to the Chancellor to pass on the full 1.5%.
So what do we find this week? RBS reneged on the promise to its RBS One Account customers (formerly a joint venture with Virgin but now 100% owned by RBS) by only reducing mortgage rates by 1%, all this under cover of the repossession period 'smoke screen' to distract the media attention.
The banks argue that their own cost of borrowing in the wholesale money markets has not come down as much as the base rate, but this is not true. 3 month LIBOR averaged 5.82% in the week before the base rate cut on 6th November and it averaged 3.96% in the week leading up to the 1st December. So LIBOR has actually come down by more that the base rate.
So come on Robert, please expose RBS on the 6 o'clock and 10 o'clock news and interview Stephen Hester for an explanation of why RBS seems to be increasing the profits it makes at the expense of mortgage customers by not passing on the base rate cuts!
Perhaps you could also ask the Chancellor to explain why he is allowing a state majority owned bank to break its promises to him on 7 November and to limit by not passing on the full cut the effectiveness of the monetary policy changes that the government and we all so desperately need to mitigate the recession.
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Having watched the BBC programme yesterday highlighting the demise of three families I feel compelled to write this blog.
One family featured recognising they were in financial difficulties attempted to downsize in order to reduce their indebtedness. The society took the view they because of the arrears the couple would not get a mortgage offer on the new property - WHY ?, surely they were acting responsibly and reducing the societies risk.
Eventually they resorted to private rental and on the day of the move secured an offer on the house of 160K which the society flippantly refused to accept - WHY ? inevitably the house will be sold at auction for less than this with the family in question remaining in debt - what a irresponsible way of conducting business
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