Another interest rate cut on the way
P. Burridge
taking a 'salami slice' approach to cutting interest rates. By
making tiny, quarter point reductions, they aim to see how much
they can get away with without unsettling the markets. So far, the
policy has succeeded. Since the last cut, the pound has actually
firmed against the DM. There is a global trend at present towards
lower rates, to stave off the possibility of recession. Lower rates
abroad increase the scope for lower rates in the UK. Monetary
easing has occurred in both the US and Germany (the latter is also
now applying fiscal measures in an attempt to generate growth).
The liklihood of a 6% base rate in the near future has to be very
strong.
The only fly in the ointment is Eddie George, the governor, whose
hawkish attitude towards the possibility of a resurgence of
inflation will lead him to deprecate further rate cuts. Mr. George
has shown himself to be on the cautious side when it comes to
monetary policy. He overstated inflationary risks last Summer and
was subsequently proven wrong, on his own admission. In an ideal
world, and in the run up to a general election, Mr Clarke would hope
to be able to continue to nibble away at rates unnoticed,
eventually basking in the glory of a revived economy by
approximately Spring next year (the Tories favoured date for an
election). But he will need to keep Eddie on board somehow. This
will be difficult, as the two chaps have different agendas. Mr.
George is concerned with keeping inflation within the target range,
whereas Mr. Clarke is concerned with the government's re-election
prospects. These two aims are incompatible with each other. Mr.
Clarke must be regretting the decision to publish minutes of
meetings between himself and the governor. Perhaps the best thing
to do would be to announce that publishing the minutes was a
limited experiment that has run its course and it has been decided
not to extend it further. This would be met with some scepticism in
the City, but Mr. George must be silenced. Mr. Clarke is keen to
ensure that further rate reductions go through largely unremarked.
Note at their last meeting, when all eyes were on them, no
announcement of the forthcoming rate cut was made. Until the
following day, that is. Presumably they thought it would attract
less attention that way. It's shifty and furtive behaviour, but it
does indicate the sensitivity of the two to how these reductions
(which need to be one-way only for now until the general election)
are perceived by the markets. 'Don't look now, we're changing
rates' is how it comes across. Anyway, look for a further rate cut,
probably in the Spring.
-Paul
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abelard
Burridge)
typed:
> But he will need to keep Eddie on board somehow. This
>will be difficult, as the two chaps have different agendas. Mr.
>George is concerned with keeping inflation within the target range,
>whereas Mr. Clarke is concerned with the government's re-election
>prospects. These two aims are incompatible with each other.
it seems suspicion that 'they' are inflating again grows
day by day.
>Clarke must be regretting the decision to publish minutes of
>meetings between himself and the governor. Perhaps the best thing
>to do would be to announce that publishing the minutes was a
>limited experiment that has run its course and it has been decided
>not to extend it further. This would be met with some scepticism in
>the City, but Mr. George must be silenced. Mr. Clarke is keen to
>ensure that further rate reductions go through largely unremarked.
i can't see where your tongue is.
----------------------------------------------------------------------------------
abelard
socratic gadfly - please e-mail if response required
abelard @ abelard.demon.co.uk
all that is necessary for I walk quietly and carry
the triumph of evil is that I a big stick.
good people do nothing I trust actions not words
only when it's funny -- roger rabbit
-----------------------------------------------------------------------------------
Paul Hennessey
>The liklihood of a 6% base rate in the near future has to be very
>strong.
>The only fly in the ointment is Eddie George, the governor, whose
>hawkish attitude towards the possibility of a resurgence of
>inflation will lead him to deprecate further rate cuts. Mr. George
>has shown himself to be on the cautious side when it comes to
>monetary policy.
I don't know .............. I sometimes wonder whether a brief hike in
the rate of inflation might do a better job of stimulating growth in
the housing market than measures taken to date have done. Speaking
from within the industry I have to say that the objection to purchase
or the objection to a mortgage (mainly first time buyers) is usually
due to percieved lack of investment and/or the feeling that the monies
paid out for a mortgage are as dead as rental payments rather than
cost being too high. I feel that a rise in inflation creating a rise
in house prices may stimulate first time buyer activity which in turn
should filter up through the entire market.
I know there are many other economic considerations here but today....
I'm feeling particularly selfish and self centred.
Regards......
Paul.........
==================================================
These are my thoughts, opinions and beliefs. They
must not be constituted as advice of any kind.
Paul Hennessey.
==================================================
David Hough
pa...@laphouse.demon.co.uk (Paul Hennessey) writes:
>
> I don't know .............. I sometimes wonder whether a brief hike in
> the rate of inflation might do a better job of stimulating growth in
> the housing market than measures taken to date have done. Speaking
> from within the industry I have to say that the objection to purchase
> or the objection to a mortgage (mainly first time buyers) is usually
> due to percieved lack of investment and/or the feeling that the monies
> paid out for a mortgage are as dead as rental payments rather than
> cost being too high. I feel that a rise in inflation creating a rise
> in house prices may stimulate first time buyer activity which in turn
> should filter up through the entire market.
>
finally had my income catch up with house prices after the farce of the
'80s with all the tax-relief shenanigans artificially inflating said
prices. I don't consider it to be an investment as such, although I
envisage one day not having to pay a mortgage or rent - that is my
incentive.
Abolish stamp duty on houses and the insurance premium tax (a real
rip-off), encourage lenders to do something about their surcharge for
mortgages greater than 75% (if house prices are static, that could be
pushed up to 85% or 90%).
Dave
--
da...@llondel.demon.co.uk
Any advice above is worth what I paid for it.
M Holmes
: I don't know .............. I sometimes wonder whether a brief hike in
: the rate of inflation might do a better job of stimulating growth in
: the housing market than measures taken to date have done.
If by "growth" you mean higher turnover then I doubt inflation would
help in the short term. There's every sign that investors expect a real
rate of return and so any increase in inflation would likely lead to
higher mortgage interest rates. Now that the tax deduction is worth only
half what it was in the last peak in interest rates, this would hurt
homeowners worse than it did last time.
However, the odds are that house prices wouldn't rise with inflation
since the low turnover indicates that houses are still perceived as
overpriced. If inflation rose while house prices didn't then the real
fall in house prices might alter that perception and eventually increase
turnover.
: Speaking
: from within the industry I have to say that the objection to purchase
: or the objection to a mortgage (mainly first time buyers) is usually
: due to percieved lack of investment and/or the feeling that the monies
: paid out for a mortgage are as dead as rental payments rather than
: cost being too high.
Money paid out to rent money *is* equivalent to money paid out to rent
property.
: I feel that a rise in inflation creating a rise
: in house prices may stimulate first time buyer activity which in turn
: should filter up through the entire market.
As I've mentioned, lack of demand indicates that housing is still
regarded as overpriced. That indicates further falls rather than a rise.
Demographics also mitigate against future house price rises. There are
simply less young people to buy houses. Added to this are factors like
housing probably having reached a peak in terms of the percentage of the
Uk population who actually want to be homeowners. Then there's the trend
towards people starting families later.
The odds are that there will be further real falls in house prices.
Whether that happens through gradual erosion by inflation with stable
nominal house prices, or by another sudden fall caused by those who are
hanging on waiting for things to get better finally giving up and
selling (a normal scenario after a speculative boom) remains to be seen.
The end result may be that the UK housing market begins to look more
like the continental one where people rent until family formation and
then buy a family home. Negative and neutral equity coupled with zero
house price inflation mean that people must find transfer costs out of
income rather than equity will also encourage this. When people have to
pay the cost of moving out of income, they'll want to move as little as
possible. That encourages the rent then buy a semi-permanent home
scenario.
The evidence for this would be the market in family homes returning to
normal volumes while the market for starter flats remains moribund.
: I know there are many other economic considerations here but today....
: I'm feeling particularly selfish and self centred.
Fair enough but I figure that increased inflation would harm the housing
market a lot more through higher interest rates than it could possibly
help it. The simple perception of interest rates beginning to increase
again would keep people out of the market. Nobody wants to be bitten the
way te speculators of the late 80's were.
: Paul Hennessey.
FoFP
--
"You've certainly convinced me that things are not merely loony at
Smith; the inmates are running the asylum, and charging $26,320 a
year to share the experience."
-- Howard.E.Motteler
M Holmes
:
: In article <4famh5$e...@scotsman.ed.ac.uk>, M Holmes (fo...@festival.ed.ac.uk) writes:
: >As I've mentioned, lack of demand indicates that housing is still
: >regarded as overpriced. That indicates further falls rather than a rise.
: >Demographics also mitigate against future house price rises. There are
: >simply less young people to buy houses. Added to this are factors like
: >housing probably having reached a peak in terms of the percentage of the
: >Uk population who actually want to be homeowners. Then there's the trend
: >towards people starting families later.
: >>
: The perception that houses still have some way to go to bottom out
: has passed. The Halifax index has shown month on month rises in
: house prices for 6 consecutive months now.
But the annual trend is still down. Six monthly rises may raise hopes
but it'd be a foolish person who made a bet based on it. The fact that
volumes are low when compred even with the period before the boom
indicate that houses are still overpriced. Unless you believe that
current volumes *are* now the normal level? It true, it indicates that a
lot more estate agents will be closing.
Are the Halifax figures adjusted for the types of property that are
selling? As I've said, if we're moving towards a continental style
housing market then starter flats will remain moribund while trade picks
up in family homes. The latter being more expensive would skew average
sales proice figures unless they were suitably adjusted.
: The overall picture of
: house prices over 20 years I conceed, will be pretty flat. But
: within that 20 year span there will be cycles of growth and
: contraction in prices that the astute person could exploit
: advantageously.
Back to the speculative boom mentality eh? I figure a lot of people
accept that they're not so astute anymore and most folks don't have the
mobility to exploit regional variations even if they had the knowledge
to do so. The fact that transfer fees now have to be found from income
rather than equity also mitigate against this. Most people will buy
houses as a place for a family now, but if you feel you're clever enough
to speculate, I'd be interested to see a balance sheet at a future date.
I think it'd be very hard to beat the FT-SE100 Index though.
: The signs now point to a steady increase in house
: prices, driven largely by increased earnings
Real earnings are barely rising at all. Increasing job insecurity
mitigates against taking long term bets based on short term incomes.
: and lower interest
: rates, for the next 18 months at least.
That's one factor in favour. However, anyone who buys a house now knows
that they'll have to be prepared to pay higher interest rates at the
next peak of the interest rate cycle, and that they'll have to do so
without all the mortgage relief that used to be available.
There will be another speculative boom. It won't be until the current
crop of ten year olds have money though (they're young enough not to
understand what getting burned in the last one meant) and it won't be in
housing. They'll have discovered another Magic Money Tree and it'll end
in exactly the same way.
But still, if you're investing, I have some tulip bulbs. They used to be
worth ten thousand quid at the height of the boom. I'll let you have
them for a hundred each and you can profit at the height of the next boom.
: -Paul
FoFP
P. Burridge
>As I've mentioned, lack of demand indicates that housing is still
>regarded as overpriced. That indicates further falls rather than a rise.
>Demographics also mitigate against future house price rises. There are
>simply less young people to buy houses. Added to this are factors like
>housing probably having reached a peak in terms of the percentage of the
>Uk population who actually want to be homeowners. Then there's the trend
>towards people starting families later.
>>
The perception that houses still have some way to go to bottom out
has passed. The Halifax index has shown month on month rises in
house prices for 6 consecutive months now. The overall picture of
house prices over 20 years I conceed, will be pretty flat. But
within that 20 year span there will be cycles of growth and
contraction in prices that the astute person could exploit
advantageously. The signs now point to a steady increase in house
prices, driven largely by increased earnings and lower interest
rates, for the next 18 months at least.
-Paul
Leigh Blue Caldwell
>
> Paul Hennessey (pa...@laphouse.demon.co.uk) wrote:
>
> : the objection to a mortgage (mainly first time buyers) is usually
> : due to percieved lack of investment and/or the feeling that the monies
> : paid out for a mortgage are as dead as rental payments rather than
> : cost being too high.
>
> Money paid out to rent money *is* equivalent to money paid out to rent
> property.
>
Yes, but with a mortgage you get to slowly buy the property at the same
time as you're renting the money (capital repayments in addition to
interest). I've never seen such a deal on offer with rental (I'm about
to start renting a house now, so if anyone wants to set a precedent, let me
know...)
Also, renting money tends to be cheaper than renting houses; there's more
competition and it's a more efficient market.
Regards,
Leigh.
--
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Internation....
Internet partnerships for international sales and marketing.
http://www.internation.co.uk/ +44-171-242-3200 (fax 3033)
Allied House, 45 Hatton Garden, London EC1N 8EX, UK.
----------------------------------------------------------------------
M Holmes
: M Holmes wrote:
: >
: > Paul Hennessey (pa...@laphouse.demon.co.uk) wrote:
: >
: > : the objection to a mortgage (mainly first time buyers) is usually
: > : due to percieved lack of investment and/or the feeling that the monies
: > : paid out for a mortgage are as dead as rental payments rather than
: > : cost being too high.
: >
: > Money paid out to rent money *is* equivalent to money paid out to rent
: > property.
: >
: Yes, but with a mortgage you get to slowly buy the property at the same
: time as you're renting the money (capital repayments in addition to
: interest).
Anyone who's renting property can similarly pay capital into an
investment account with the same result.
: I've never seen such a deal on offer with rental (I'm about
: to start renting a house now, so if anyone wants to set a precedent, let me
: know...)
Take an endowment policy and pay money into it just like a homebuyer.
When you cash in the endowment policy, buy a house, or whatever else you
fancy with the money.
: Also, renting money tends to be cheaper than renting houses; there's more
: competition and it's a more efficient market.
There's something to that. However, homebuying incurs costs which aren't
incurred by renting. There's buying furniture, paying the various fees
and duties involved in buying a house (and selling one later), insuring
the house, insuring the mortgage, indemnifying the mortgage, absorbing
any capital losses on the house, absorbing repairs costs on the house,
and paying any bridging loans caused by low liquidity in the housing
market. The gains which accrue but do not accrue to renting cannot
properly include capital repayments but do include debt erosion due to
inflation and any increase in equity (rare in recent years).
I keep an index of how much home ownership has been costing the owner in
the previous year. That stands at 12.5% of the property value right now.
Obviously it's partly based on estimates and partly on figures like the
underlying inflation index, the mortgage rate, and the Halifax House
Price Index. I can post the calculations if you like.
At the worst part of the Housing bust, the index was at 21.5% (i.e in
one year, owning a home cost more than one fifth of its total value one
way or another). It's been as low as 9.2% more recently but has risen
again with changes in inflation, the House Price Index, MIRAS, and the
extra cost of insuring a mortgage for 9 months of payment.
Basically things aren't nearly as bad as they have been for homeowners
but they're not even remotely as good as they used to be either. If you
have to pay the entire value of a property to live in it for 8 years,
it's a reasonable question to ask if it might be possible to rent more
cheaply. The FT suggests a figure of 7 to 8% of capital value for renting.
It seems low to me but I currently rent for about 9%.
: Regards,
: Leigh.
Christine Boulby
in North America everyone there wanted to get rid of their mortgage as
quickly as possible to save money. Here (UK) its just the opposite,
everyone wants to maximise the size of their mortgage to the ceiling
for MIRAS. Is it that good a deal or what?
--
Chris Boulby
Ch...@coniston.demon.co.uk
David Hough
fo...@festival.ed.ac.uk (M Holmes) writes:
>
> : I've never seen such a deal on offer with rental (I'm about
> : to start renting a house now, so if anyone wants to set a precedent, let me
> : know...)
>
> Take an endowment policy and pay money into it just like a homebuyer.
> When you cash in the endowment policy, buy a house, or whatever else you
> fancy with the money.
>
1971 (price of a decent house around that time). What would it be worth
now? Had you bought the house and paid interest on the 10,000 instead
of paying rent, you would be in the clear by now.
OK, it isn't quite that simple......
abelard
typed:
>Back to the speculative boom mentality eh? I figure a lot of people
>accept that they're not so astute anymore and most folks don't have the
>mobility to exploit regional variations even if they had the knowledge
>to do so. The fact that transfer fees now have to be found from income
>rather than equity also mitigate against this. Most people will buy
>houses as a place for a family now, but if you feel you're clever enough
>to speculate, I'd be interested to see a balance sheet at a future date.
>I think it'd be very hard to beat the FT-SE100 Index though.
>
and with much lower transer costs as long as you shop around.
>There will be another speculative boom. It won't be until the current
>crop of ten year olds have money though (they're young enough not to
>understand what getting burned in the last one meant) and it won't be in
>housing. They'll have discovered another Magic Money Tree and it'll end
>in exactly the same way.
so teach your children now, never to step into the shit
without waders.
>But still, if you're investing, I have some tulip bulbs. They used to be
>worth ten thousand quid at the height of the boom. I'll let you have
>them for a hundred each and you can profit at the height of the next boom.
>
two very goood posting. nice that somebody can still count.
agree with every word you type
and remember 800,000 houses empty.
and inflation higher than the apparent rise posted by
halifax and nationwide.
and a government that i am now convinced
is inflating again as the erection approaches.
and there are rentable houses in many areas
going for less than mortgage interest......
which will rise again with more inflation.
not to mention...again the transfer costs.
our local freebie property papers week after
week, month after month, year after year,
sing a siren song of house price recovery
as often has halifax survey and still year
after year the real price drops.
but but but....they can't keep dropping...can they?
the gov't was talking about more house building
only this week......
don't buy, rent, unless you are damn sure
you do not mind a (presently) gentle erosion
of value, and strongly consider long term
fixed interest loans.
let the owner worry! that's capitalism!
sorry about the bulbs, i'm buying milk bottle tops thanks
i'm certain they are the coming thing......just can't lose....
those who do not study history are destined to repeat it.
muchos regards.
David Shepherd
: OK, I have been reading this thread with some interest. When I lived
: in North America everyone there wanted to get rid of their mortgage as
: quickly as possible to save money. Here (UK) its just the opposite,
: everyone wants to maximise the size of their mortgage to the ceiling
: for MIRAS. Is it that good a deal or what?
While with MIRAS down to 15% it is no longer the good deal it used
to be (especially when high rate tax payers could get MIRAS at 40%),
a mortgage after MIRAS deduction is probably one of the cheapest ways
around of borrowing money - currently a 7.5% mortgage is 6.375% after
MIRAS. Given that you can get fixed rate TESSAs at the 7-7.5% mark
(and equities may net more) putting money into investments instead of
paying of MIRAS portion of a mortgage may bring in more money than
it costs. Also, if by paying off all of a mortgage you end up borrowing
for other purposes (e.g. car loan etc) then you'll end up paying a much
higher rate of interest.
--
--------------------------------------------------------------------------
david shepherd
SGS-THOMSON Microelectronics Ltd, 1000 aztec west, bristol bs12 4sq, u.k.
tel/fax: +44 1454 611638/617910 email: d...@bristol.st.com
"whatever you don't want, you don't want negative advertising"
M Holmes
: In article <4fdfds$a...@scotsman.ed.ac.uk>
: fo...@festival.ed.ac.uk (M Holmes) writes:
: >
: > : I've never seen such a deal on offer with rental (I'm about
: > : to start renting a house now, so if anyone wants to set a precedent, let me
: > : know...)
: >
: > Take an endowment policy and pay money into it just like a homebuyer.
: > When you cash in the endowment policy, buy a house, or whatever else you
: > fancy with the money.
: >
: Not necessarily a good idea. Imagine taking out a 10,000 endowment in
: 1971 (price of a decent house around that time). What would it be worth
: now? Had you bought the house and paid interest on the 10,000 instead
: of paying rent, you would be in the clear by now.
My argument didn't concern what might be bought with the proceeds of an
endowment policy.
Te point is that the *endowment* taken out by a renter is equal to the
endowment taken out by a buyer. The question of whether to buy a house
earlier or later in the expectation of a price rise (or fall) is one of
speculation.
Certainly having rented and taken an endowment in the 70's wouldn't have
enabled a house to be bought in 1996 on the proceeds if it were equal to
a homebuyers endowment policy. Speculation is easy with 100% hindsight.
What we don't know is whether this is also true in 1996.
It is true however that the result of the endowment is independent of
whether the investor is a buyer or renter. The difference is whether
house prices rise or fall. Therefore in a comparison, the endowment
payment, or repayment part of a mortgage can be ignored in compering
costs. It is however true that the House Price Index will affect the
comparison.
: OK, it isn't quite that simple......
As I said, I've been keeping an index to track the comparison for some
time now. The index was actually negative in 1987 (i.e even after costs,
homeowners that year made a profit on their houses), reached 21.5% of
capital value in 1994 and is now around 12.5%
I'll mail the calculations on request.
: Dave
M Holmes
: On 8 Feb 1996 15:21:15 GMT, fo...@festival.ed.ac.uk (M Holmes)
: typed:
: >Back to the speculative boom mentality eh? I figure a lot of people
: >accept that they're not so astute anymore and most folks don't have the
: >mobility to exploit regional variations even if they had the knowledge
: >to do so. The fact that transfer fees now have to be found from income
: >rather than equity also mitigate against this. Most people will buy
: >houses as a place for a family now, but if you feel you're clever enough
: >to speculate, I'd be interested to see a balance sheet at a future date.
: >I think it'd be very hard to beat the FT-SE100 Index though.
: >
: and with much lower transer costs as long as you shop around.
: >There will be another speculative boom. It won't be until the current
: >crop of ten year olds have money though (they're young enough not to
: >understand what getting burned in the last one meant) and it won't be in
: >housing. They'll have discovered another Magic Money Tree and it'll end
: >in exactly the same way.
: so teach your children now, never to step into the shit
: without waders.
People tried that after the Wall Street Crash and we still got Junk
Bonds. Even if it does get through that one particular token, in that
case shares on 90% magin, is very risky, they'll just pick another token
and convince themselves that it can't lose money. In this case it was
domestic housing on 90%, 100%, or at the peak, even 110% margin.
This has been done before with tulip bulbs, South Sea Shares, lots of
swamp in Miami and god alone knows what else. The tokens don't much
matter. The initial result is that people figure they've found a Miagic
Money Tree. As speculative mania gets going, a whole industry appears,
or grows to broker and finance the mania. Another industry appears as
experts write learned papers to show why this not only can, but is
certain to continue evermore. Politicians are dawn in either directly or
because nobody wants to hear anything but the Good News. Dissenters are
banned from the media and derided as not only stupid, but actually
dangerous. Not that irt matters since it becomes so much the received
wisdom that it's a certain way to fortune that people don't even bother
listening to self-appointed experts, never mind actually researching the
matter before they spend ten times as much money as they have saved in
their lives. They'd spend even more if someone would loan them it.
Finally, people are buying and selling over a weekend not the tokens
themselves, but future options in tokens that don't yet exist.
Then a pause comes. The experts announce a "healthy breathing space"
before the inevitable next boom. Then prices start to fall back a
little. The smarter folks who know a little about speculative booms take
profits. This selling drives prices down further. The brokers begin to
worry and tighten up the permited margin. This locks out some investors
and the lessened demand drives prices further down. Then some brokers
worry about their monay and make margin calls. Investors who can't pony
up more margin because they've hocked everything they had into the
market are forced to distress selling. This drives the market down
prompting more margin calls. Then people who see their life savings
disappearing fast finally realise that it's not a healthy breathing
space, there won't be a boom and they get out if they can with whatever
they still have. This drives prices down further and the first panic
phase is underway.
Then things quieten down. People who bought late in the boom are
struggling with debt. The brokers are also in trouble vis a vis their
credit rating because they see that some debts will never be collected.
They make more margin calls forcing a few more unlucky speculators out
of the market and into debt. Some brokers go to the wall. Everyone
demands State aid. A few get it before the government realises the kind
of bottomless pit it would be pouring money down. People then demand
that the State stop folks from reneging on their debts. Some cases end
up in Court. Lots of people go bankrupt. Many swear never to enter the
market again. The brighter ones swear never to borow money in any market
again, or at least limit borrowing to some sane amount. A few "experts"
desultorally predict a coming boom. Many speculators who are in debt but
can make payments hang on hoping that rising prices will clear them of
the problem. Prices remain relatively stable. Inflation does it's work.
Sometimes a second phase occurs a few years later. People who were
hanging on realise that prices aren't going to rise to take them out of
the problem and decide to get out of the market at any price, even
bankruptcy. This drives prices down and sets up a second panic phase as
others who were waiting and hoping panic sell on a second wave of
falling prices. In some busts this second phase has produced drops equal
to the total drop so far, but much more quickly.
The bottom has been reached. Prices will remain fairly stable or track
inflation for years. In some speculative booms, prices have never again
reached the previous top (tulip bulbs) or have taken a generation to do
so (the Miami land lots bubble).
The generation that got burned does avoid getting burned again and even
educates the next one about the dangers of speculating on margin. The
second generation grows up, acquires money and discovers a speculative
token that's been proved to be a Magic Money Tree and the cycle repeats.
I'd be interested in hearing which token it'll be. Buying now might be a
good way to guarantee my pension :-)
: >But still, if you're investing, I have some tulip bulbs. They used to be
: >worth ten thousand quid at the height of the boom. I'll let you have
: >them for a hundred each and you can profit at the height of the next boom.
: two very goood posting. nice that somebody can still count.
: agree with every word you type
: and remember 800,000 houses empty.
: and inflation higher than the apparent rise posted by
: halifax and nationwide.
: and a government that i am now convinced
: is inflating again as the erection approaches.
: and there are rentable houses in many areas
: going for less than mortgage interest......
: which will rise again with more inflation.
: not to mention...again the transfer costs.
Rising interest rates, I suspect, may be the trigger for phase two of
the housing bust. Labour oughta be praying that it happens under the
Tories rather than later.
: our local freebie property papers week after
: week, month after month, year after year,
: sing a siren song of house price recovery
: as often has halifax survey and still year
: after year the real price drops.
The Halifax are the self appointed "experts" I've been talking about.
Every year since 1989 they've overestimated the House Price Index
prediction by 5 or 6 percent.
Biggest Turkey Award goes to Prudential though for buying 400 Estate
Agencies at the end of the boom and selling them nack for 10% of what
they paid for them.
: but but but....they can't keep dropping...can they?
Nothing drops forever just like nothing rises forever.
: sorry about the bulbs, i'm buying milk bottle tops thanks
: i'm certain they are the coming thing......just can't lose....
Given the tulip bubble, nothing would surprise me.
: those who do not study history are destined to repeat it.
A good book to read re the Tulip Bubble is a victorian epic called
"Great Delusions and the Madness of Crowds". I had to get it by
inter-library loan, but I've since seen reprints going for a Pound in
those cheapo bookshops. It's got some other interesting delusions in
there too. Books on the Wall Street Crash, the Miami Property Bubble,
and the South Sea Bubble shouldn't be too hard to find. Diligent
research might even turn up something on the land price crash in Britain
at the start of the century when another token lost 90% of its value.
: muchos regards.
FoFP
M Holmes
: Christine Boulby (Ch...@coniston.demon.co.uk) wrote:
: : OK, I have been reading this thread with some interest. When I lived
: : in North America everyone there wanted to get rid of their mortgage as
: : quickly as possible to save money. Here (UK) its just the opposite,
: : everyone wants to maximise the size of their mortgage to the ceiling
: : for MIRAS. Is it that good a deal or what?
: While with MIRAS down to 15% it is no longer the good deal it used
: to be (especially when high rate tax payers could get MIRAS at 40%),
: a mortgage after MIRAS deduction is probably one of the cheapest ways
: around of borrowing money - currently a 7.5% mortgage is 6.375% after
: MIRAS. Given that you can get fixed rate TESSAs at the 7-7.5% mark
: (and equities may net more) putting money into investments instead of
: paying of MIRAS portion of a mortgage may bring in more money than
: it costs. Also, if by paying off all of a mortgage you end up borrowing
: for other purposes (e.g. car loan etc) then you'll end up paying a much
: higher rate of interest.
Indeed. There were papers by economists as early as the 1960's arguing
that by encouraging people to invest their money into bricks and mortar
rather than productive industry, Britain was basically undermining its
own economy. Of course the real damage was done after 1985 when John
Major, then at Treasury warned Mrs Thatcher about the possibilities and
suggested the abolition of MIRAS. Thatcher said "over my dead body" and
the rest is history.
It looks like the government no longer has the political courage to
complete abolition though.
: david shepherd
FoFP
Leigh Blue Caldwell
>
> and there are rentable houses in many areas
> going for less than mortgage interest......
I'm not suggesting your statement is incorrect, but I would be interested
to know where. I've been looking for the last few weeks for a place, but
was planning to rent because my company's probably not established enough
to get me a mortgage (they generally require at least three years audited
accounts). I saw an offer advertised for new houses (purchase price about
#70,000) which equated to repayments of #49 per week. This was subsidised
by the developer, so once the subsidy stopped it was going to go up to
about #65 per week. Rental on roughly equivalent properties seemed to be
nearly double that amount.
This is in London, so the market here is not very similar to the rest of
the country. I suppose the private rental market elsewhere is nothing
like so large. Anyone know more about this than I do?
Regards,
Leigh.
p.s. I have found somewhere (finally) so no need to offer your homes for
me to live in :)
Simon Patience
|> OK, I have been reading this thread with some interest. When I lived
|> in North America everyone there wanted to get rid of their mortgage as
|> quickly as possible to save money.
I am working to get rid of mine as quickly as possible. I think I might manage it
in about 29 years time.
|> Here (UK) its just the opposite,
|> everyone wants to maximise the size of their mortgage to the ceiling
|> for MIRAS. Is it that good a deal or what?
What is the limit nowadays? Still Ł30,000? That doesn't buy you much of a house
these days.
Simon.
--
Simon Patience Phone: (415) 933-4644
Silicon Graphics, Inc FAX: (415) 962-8404
2011 N. Shoreline Boulevard Email: s...@sgi.com
Mountain View, CA 94043
N J Marsh
>: On 8 Feb 1996 15:21:15 GMT, fo...@festival.ed.ac.uk (M Holmes)
>: and a government that i am now convinced
>: is inflating again as the erection approaches.
I think you had better talk to your threapist about your Freudian slips
Nic
Matthew Docherty
Christine Boulby <Ch...@coniston.demon.co.uk> wrote:
> OK, I have been reading this thread with some interest. When I lived
> in North America everyone there wanted to get rid of their mortgage as
> everyone wants to maximise the size of their mortgage to the ceiling
> for MIRAS. Is it that good a deal or what?
I think it partly depends on the prevailing opinion about interest
rates. Mortgages in North America are usually fixed rate, whereas UK mortgages
are floating. Also, I think the tax structure is somewhat different. Certainly
in the UK it makes sense to take out as big a mortgage as possible, since this
gives you the chance to claim huge mortgage tax relief. I'm not sure about the
exact tax structure in America though - perhaps someone else could enlighten
us on this?
Matt Docherty
abelard
typed:
>In article <4fg26k$3...@scotsman.ed.ac.uk>, fo...@festival.ed.ac.uk (M Holmes) says:
>
>>: On 8 Feb 1996 15:21:15 GMT, fo...@festival.ed.ac.uk (M Holmes)
>
>>: and a government that i am now convinced
>>: is inflating again as the erection approaches.
>
>I think you had better talk to your threapist about your Freudian slips
>
you'd better talk to a logician about assumptions.
abelard
<bl...@ftech.co.uk>
typed:
>abelard wrote:
>>
>> and there are rentable houses in many areas
>> going for less than mortgage interest......
>
>I'm not suggesting your statement is incorrect, but I would be interested
>to know where.
bigger properties in country areas.
houses people intend to return to, eg from abroad
and get what return they can meanwhile. also
stops the place being vandalised.
second houses that owners cannot unload at the price
they regard as the true value(ie what they want)
'i will hang on until the prices rise again'
meanwhile the price continues to drop
they continue to pay outgoings above income.
they would be better cutting losses and saving
the difference.
any trader who does not know how to take a loss
will tend to lose more.
the price of any object is exactly what some-one
is prepared to pay for it.
abelard
<bl...@ftech.co.uk>
typed:
>abelard wrote:
>>
>> and there are rentable houses in many areas
>> going for less than mortgage interest......
>
>I'm not suggesting your statement is incorrect, but I would be interested
>to know where. I've been looking for the last few weeks for a place, but
feeling i had aswered too briefly...a bit more.
make an assessment of how long you expect
to live in your house.
calculate your transfer costs.
calculate the costs such as fitted carpets
you will not be able to take when you go.
look at property taxes...are they included
in rent? are repairs down to owner.
negotiate contract...your position is
strongest before you sign. remember
once you are settled they will keep trying
to jack up the price.
(roughly) work out what your yearly losses
on the price of your house currently.
(nominal % increase - inflaton%)xhouse 'value'.
only then check your costs against rent.
much of this you will not pay if you rent.
match this lot against the interest element in
your mortgage only. (do similar calcs on repayment
elements), compare where relevant with
interest rates available to you(eg building soc.)
remember i am near certain that the gov't is
deliberately causing inflation again. if true
your interest rates will soon rise....around
the time the next erection is over.
therefore if you buy consider long term fixed
interest mortgages(shop around for the lowest
....long term rate)
remember that is my 'view' and that *nobody* but
*nobody* knows the future, it is all guessing
often dressed up as 'forcast' etc.
any one who tells you they can see the future
is either a liar or fool or both
let the buyer beware!
Hugh Davies
> I think it partly depends on the prevailing opinion about interest
>rates. Mortgages in North America are usually fixed rate, whereas UK mortgages
>are floating. Also, I think the tax structure is somewhat different. Certainly
>in the UK it makes sense to take out as big a mortgage as possible, since this
>gives you the chance to claim huge mortgage tax relief.
What makes you think that relief at 15% on the first 30K is "huge"?
--
Regards,
Huge.
-------------------------------------------------------------------
Hugh Davies, Bedfordshire, England.
"The British are subtle, but nasty when provoked." --spaf
Christine Boulby
ball...@sable.ox.ac.uk "Matthew Docherty" writes:
> In article <823812...@coniston.demon.co.uk>,
> Christine Boulby <Ch...@coniston.demon.co.uk> wrote:
When I lived in North America everyone there wanted to get rid of their
mortgage as quickly as possible to save money.
> Certainly in the UK it makes sense to take out as big a mortgage as
> possible, since this gives you the chance to claim huge mortgage tax
> relief.
Exactly, but that's what I'm asking. Is it cost effective to hold this
point of view or would it be wiser to pay of whatever mortgage you have
so you don't have to pay interest?
Does it depend on the size of your mortgage, or is it just a better deal
all round here with tax rates as they are? Someone approached this in
an earlier post but I'm still not sure.
Say hypothetically you had a mortgage of 25,000 pounds. If you had the
cash should you pay it off or invest the money? Which would be the most
financially beneficial given the amount of interest you pay on a
25 year mortgage vs the money you'd get from an investment?
--
Chris Boulby
Ch...@coniston.demon.co.uk
Charles Bryant
M Holmes <fo...@festival.ed.ac.uk> wrote:
>...There were papers by economists as early as the 1960's arguing
>that by encouraging people to invest their money into bricks and mortar
>rather than productive industry, Britain was basically undermining its
>own economy. Of course the real damage was done after 1985 when John
>Major, then at Treasury warned Mrs Thatcher about the possibilities and
>suggested the abolition of MIRAS. Thatcher said "over my dead body" and
>the rest is history.
It never fails to amaze me what the Conservatives get away with. They
claim to be champions of the free market and still get away with
distorting the property market without being challenged.
P. Burridge
>remember i am near certain that the gov't is
> deliberately causing inflation again. if true
> your interest rates will soon rise....around
> the time the next erection is over.
The government isn't "deliberately causing inflation again."
Rather, monetary policy has been eased (as it has been across the
world) in an effort to stave off recession. Granted, the easing in
the UK has been carried out more with the intention of reflating
the economy for political reasons than staving off recession, but
the inflationary consequences in the UK are still a concern.
Buy gilts in the second half of this year.
M Holmes
: In article <4fg26k$3...@scotsman.ed.ac.uk>, fo...@festival.ed.ac.uk (M Holmes) says:
: >: On 8 Feb 1996 15:21:15 GMT, fo...@festival.ed.ac.uk (M Holmes)
: >: and a government that i am now convinced
: >: is inflating again as the erection approaches.
: I think you had better talk to your threapist about your Freudian slips
And you should contact User Support concerning how to use attributions
correctly :-)
: Nic
Dom
<rant>
Money money money. Well I suppose this *is* crossposted to uk.finance
as well as uk.misc. My house may well now be worth less than I paid
for it. I don't care. It's mine. I don't have someone coming round to
check that the house is still okay every six or twelve months - it is,
just about ;-}.
I can drill holes in the wall everywhere I damn please without having to
get someone else's say-so. (Yes, I'm single). I don't have to renegotiate
a contract every six or twelve months. When the washing machine breaks
down *I* make the choice of which replacement to get... or whether to get
one at all (I did). I can build, extend, demolish the shed or chop those
huge trees down.
And finally, I won't get told that the contract will not be renewed because
the house is going on the market because they can't afford to reroof it.
In short, it is my *home* in a way that no rented accomodation ever could be.
[Something about knowing the price of everything and the value of nothing
springs to mind.]
</rant> I recognise that to some the freedom of renting is far preferable
to the freedom of buying.
--
Dom\ Header approved by Steve Firth on uk.misc. Phew.
Hugh Davies
>or chop those
>huge trees down.
Err, no you can't. Most mature trees have automatic preservation orders.
abelard
typed:
>[nothing quoted from anybody in case they think I'm having a go]
>
><rant>
>
i thought it rather a good rant.
keeps the balance, always useful.
abelard
any-one know what has happened to
'the under--lying inflation rate'
so beloved of government when house
prices were rising.
now house prices and costs are dropping
it seems to 'just fade away'
as under--lying inflation lags by about 18 months.
i would like to be told:--
what is the fore-cast for 18 months time?
can eddie be persuaded to tell us?
H1 software (Stephen Burke)
> any-one know what has happened to
> 'the under--lying inflation rate'
> so beloved of government when house
> prices were rising.
It's still published, but interest rates have been pretty stable over the
last year, so RPI and RPIX are almost identical. (It excludes interest
payments, BTW, not house prices).
--
e----><----p | Stephen Burke | Internet: bu...@vxdesy.desy.de
H H 1 | Gruppe FH1T (Lancaster) | DECnet: vxdesy::burke (13313::burke)
H H 11 | DESY, Notkestrasse 85 | JANET: bu...@uk.ac.rl.v2
HHHHH 1 | 22603 Hamburg, Germany | Phone: +49 40 8998 4564
H H 1 | "It is also a good rule not to put too much confidence in
H H 11111 | experimental results until they have been confirmed by theory"
David Hough
hu...@axalotl.demon.co.uk (Hugh Davies) writes:
> In article <dom.1054...@i-cubed.co.uk>, d...@i-cubed.co.uk (Dom) writes:
>
> >or chop those
> >huge trees down.
>
> Err, no you can't. Most mature trees have automatic preservation orders.
>
abelard
typed:
>In article <8243920...@abelard.demon.co.uk>, abe...@abelard.demon.co.uk (abelard) writes:
>> any-one know what has happened to
>> 'the under--lying inflation rate'
>> so beloved of government when house
>> prices were rising.
>
>It's still published, but interest rates have been pretty stable over the
>last year, so RPI and RPIX are almost identical. (It excludes interest
>payments, BTW, not house prices).
>
thanks.do you know what would it be if house prices
were stripped out? or are they not on rpi?
whether the house price deflation offsetting general
inflation is the sort of thing that interests me.
or tending to make inflationseem more stable
than it would otherwise be.
my property rag as usual tells me house prices
are rising(as it has done for the last 5/6 years).
this time by .1% in 6 mths.
meanwhile inflation runs at ~3%
real loss ~1.5%
these things must interact. and then with the rpi.
how do you sort this out?
nice sig.
regards.
H1 software (Stephen Burke)
> thanks.do you know what would it be if house prices
> were stripped out? or are they not on rpi
As I understand it they aren't in explicitly. Mortgage interest payments do
reflect house prices as well as interest rates, but since mortgages are
generally over 20-30 years it will take a long time for the fall in prices to
make an impact on the rpi.
> whether the house price deflation offsetting general
> inflation is the sort of thing that interests me.
Not in the published figures. For buyers (particularly first-time buyers)
the lowered prices certainly do represent a reduction in inflation, but
curiously most people don't seem to see it that way.
> this time by .1% in 6 mths.
> meanwhile inflation runs at ~3%
> real loss ~1.5%
Indeed.
> these things must interact. and then with the rpi.
> how do you sort this out?
House prices haven't stabilised yet - no-one is really sure how they
should be valued. I think if you want to buy you might as well buy now
and forget about trying to optimise it. Maybe you'll make a loss over
the next few years, but at least you'll have somewhere to live :)
M Holmes
: > whether the house price deflation offsetting general
: > inflation is the sort of thing that interests me.
: Not in the published figures. For buyers (particularly first-time buyers)
: the lowered prices certainly do represent a reduction in inflation,
If you assume that as house prices rise, the difference between houses
of different values also increases (proportionate rises) then lower
house price inflation should benefit anyone who wants to trade up by
reducing the gap.
P. Burridge
>If you assume that as house prices rise, the difference between houses
>of different values also increases (proportionate rises) then lower
>house price inflation should benefit anyone who wants to trade up by
>reducing the gap.
I find this 'proportionality' in house price rises quite
interesting. Can it be safely assumed that houses of different
values rise in value in a way that is analogous to currents
expanding within a cake as it is baked? Or is it not that simple?
In other words, do the gaps in value between higher value homes
increase at a rate which is mathematically predictable with
respect to lower value homes (which obviously appreciate less)?
John Tyrrell
>Path: yama.mcc.ac.uk!warwick!tank.news.pipex.net!pipex!dish.news.pipex.net!pipex!tube.news.pipex.net!pipex!lade.news.pipex.net!pipex!gwen.pcug.co.uk!kate.ibmpcug.co.uk!osiris!burridge
>Newsgroups: uk.finance,uk.misc,uk.politics
>Message-ID: <20...@osiris.win-uk.net>
>References: <19...@osiris.win-uk.net> <8236375...@laphouse.demon.co.uk> <823704...@llondel.demon.co.uk> <8243920...@abelard.demon.co.uk> <1996Feb15.153610.1@v2> <8244295...@abelard.demon.co.uk> <1996Feb16.143632.1@v2><4g2csn$jiq@scotsman.
>Reply-To: burr...@osiris.win-uk.net (P. Burridge)
>From: burr...@osiris.win-uk.net (P. Burridge)
>Date: Sun, 18 Feb 1996 15:27:22 GMT
>Subject: Re: Another interest rate cut on the way
>Lines: 17
>Xref: yama.mcc.ac.uk uk.finance:8849 uk.misc:115597 uk.politics:127076
>
>In article <4g2csn$j...@scotsman.ed.ac.uk>, M Holmes (fo...@festival.ed.ac.uk) writes:
>>If you assume that as house prices rise, the difference between houses
>>of different values also increases (proportionate rises) then lower
>>house price inflation should benefit anyone who wants to trade up by
>>reducing the gap.
>I find this 'proportionality' in house price rises quite
>interesting. Can it be safely assumed that houses of different
>values rise in value in a way that is analogous to currents
>expanding within a cake as it is baked? Or is it not that simple?
>In other words, do the gaps in value between higher value homes
>increase at a rate which is mathematically predictable with
>respect to lower value homes (which obviously appreciate less)?
>-Paul
I think you will find that the overall housing market defies simple
mathematical analysis. Some of the lower priced homes are still declining in
value (partly perhaps because new entrants to the market do not need to start
at the bottom) - but the more expensive homes in London are now some 40%
above the bottom of the market at the end of 1992.
Ed Randall
: >or chop those
: >huge trees down.
: Err, no you can't. Most mature trees have automatic preservation orders.
My turn ...
<rant>
If you're big business you can, if you don't let any of the rent-a-mob find
out you're about to do it.
Like when I got up one Saturday morning and discovered that a certain Finnish
telecommunications company, which is building a new factory just behind my
house, decided it'd be nice if I got a full view of their "single storey
factory and office block" and demolished 2 large willows and half a dozen
mature oaks.
Aforementioned factory might only have one _floor_ but is the height of most
houses; Office block has 3 floors. When are you going to start doing the
"landscaping", ***** ?
What kind of a fine can a company expect for doing this ? Presumably one
of a similar magnitude to the couple of thousand quid awarded against
one of the cable companies recently for illegally closing roads and making
a mess. Ouch (not)! It's cheaper for most of these companies to get on and
flout the rules, rather than waste time with the beauracracy.
</rant>
Been wanting to get that off my chest for ages.
Alex Hayward
burr...@osiris.win-uk.net (P. Burridge) writes:
>In article <4g2csn$j...@scotsman.ed.ac.uk>, M Holmes
(fo...@festival.ed.ac.uk) writes:
>
>>If you assume that as house prices rise, the difference between
houses
>>of different values also increases (proportionate rises) then lower
>>house price inflation should benefit anyone who wants to trade up by
>>reducing the gap.
>
>I find this 'proportionality' in house price rises quite
>interesting. Can it be safely assumed that houses of different
>values rise in value in a way that is analogous to currents
>expanding within a cake as it is baked? Or is it not that simple?
>In other words, do the gaps in value between higher value homes
>increase at a rate which is mathematically predictable with
>respect to lower value homes (which obviously appreciate less)?
Personally, I would say that it is not that simple. Different ends
of the housing market will be affected differently by things such
as, for example, the distribution of income.
In general, I would not be surprised if there was otherwise a
tendancy for this to happen, and the prices of all houses to rise
by roughly similar proportions.
But then, this is just an opinion.
[such as, for example. AH well, I wrote it. ?!]