House prices fall 4 per cent from peak, has the crash begun?
30 Apr 2008 [3 Comments | 187 views]
Strap yourself in. This is not going to be pretty.
House prices are now 4 per cent down from October last year, according to data from the Nationwide. But that is just the beginning. Yesterday also saw the news that one of the leading players in the buy-to-let market has gone into administration, while a report from the Bank of England revealed that mortgage approvals have fallen to a record low. Hometrack also revealed an annual fall in house prices recently. But the real fireworks came from a member of the Bank of England Monetary Policy Committee (MPC), who warned yesterday that house prices in the UK could fall by a third.
The latest piece of news to
US slide hits slippery patch
30 Apr 2008 [0 Comments | 163 views]
Meanwhile, in an economy far, far away, and in an economic cycle about 12 months ahead of us, consumer confidence continues its fall off the edge of a cliff, and a leading index for tracking the housing market fell by 14 per cent from peak.
King vents his wrath on the banks
30 Apr 2008 [2 Comments | 297 views]
All change please. Not so long ago, banks were dynamic places of high risk but high reward. Shareholders liked their banks when they were full of “innovative, exciting activities. Those which adopted a more cautious approach were “often pilloried for being boring.” Who said so, why none other than Mervyn King, yesterday, when addressing the [...]
chart of the day
30 Apr 2008 [0 Comments | 180 views]
Is oil the new gold, or just plastic money?
29 Apr 2008 [3 Comments | 219 views]
Earlier this year we reported on comments made by an Indian minister that he thought oil could hit $150 a barrel this year.
At the time he seemed to be over-exaggerating the danger but with oil closing in on $120 a barrel last week that unthinkable level suddenly feels, well, thinkable.
Then along comes OPEC, with a new water level. OPEC president Chakib Kheli was quoted in Algeria's El Moudjahid newspaper yesterday as saying he believed oil could hit $200 a barrel.
$200 a barrel that would be a staggering levelproof, one would have thought, that we are running out of black gold.
Yet OPEC has long maintained that there is no danger of that. That the high price of oil is down to other factors not least a lack of refinery capacity and that there is no need, or indeed point, in it upping output.
So how then do you square the one view from OPEC that there is plenty of oil, and the other view that it could hit $200 a barrel?
Nationwide drops 95 per cent mortgages
29 Apr 2008 [1 Comment | 229 views]
This is why we have business cycles.
The Nationwide, who for so long talked up house prices, has doubled the size of the deposit required from mortgage applicants to 10 per cent of a property's value.
Meanwhile, Abbey is now only to offer interest-only mortgages for loans of less than 50 per cent of a property's value.
In truth, you can't blame either of the lenders. Take the example of Nationwide's decision to limit mortgages to 10 per cent of a property's value. Now suppose house prices fall by 11 percent from the date the property is purchased. The mortgage owner will then be sitting on 1 per cent negative equity.
Think of it in those terms, and all of a sudden it feels as if Nationwide is being too generous.
So maybe
Negative equity fears overblown or are they?
29 Apr 2008 [1 Comment | 155 views]
According to a report in the FT over the weekend, if house prices fell by 10 per cent, then actually only 2.8 per cent of houseowners would fall into negative equity. Even if prices fell by 15 per cent, just 5 per cent of owners or 0. 5million households, would face negative equity. In fact, it is argued house prices would have to fall by 25 per cent, which would then push 1.8 million households into negative equity, before one would say there is a full-blown crisis.
The pink'n headlined negative equity fears overplayed.
This data may well be right but the article misses the point on two levels.
Chart of the day
29 Apr 2008 [0 Comments | 138 views]
Bush fires the big gun and says cheque is in the post
28 Apr 2008 [4 Comments | 171 views]
Later this week when Mr and Mrs America get home from work there will be a nice surprise sitting on the doorstep: a nice big juicy cheque for $1,200 for them to spend as they like, courtesy of the US government. This is the big one, all the other measures taken up to now, in comparison, are child's play. It's a big gamble, sure, but in trying to boost the economy this way, George Dubya and his advisers are doing exactly what Keynes would have recommended.
It's a shame of course that the British government can't do the same thing because if there was one thing that could kick some life into the UK economy right now it would be a massive, one-off, pay day for all households. But you know the reasons why they say the trick can't be repeated over here.
But this begs the question: will the big tax credit do the trick? The answer to that is important, because it has implications far beyond the US.
But why can’t the UK repeat Dubya’s trick
28 Apr 2008 [2 Comments | 159 views]
But is the UK government really so powerless?
In the US, $160bn is winging its way to households, and George Dubya said the government “recognised the signs early and took action.†Even so, many fear the action taken could be too late.
If, on the other hand, you believe the UK is running around 12–24 months behind the US, the right time for a similar tax credit in the UK is probably now – or maybe a few months’ time when the election is a little closer.
But, as we all know, the UK government can’t afford similar measures.
At the end of last year, the US had a budget deficit of 1.2 per cent of GDP. The UK’s deficit, on the other hand, was 3.1 per cent of GDP. Germany’s deficit had fallen to a mere 0.3 per cent of GDP; even the deficit in France, at 2.4 per cent, was lower than in the UK.
Britain has blown it. We could be seeing the imminent end of the longest ever run of economic growth – and we haven’t put anything aside.
Well, yes that’s true up to a point, but it isn’t the full story.
