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I meant it the other way round:
"a) people can no longer afford their mortgage repayments
b) houses get repossessed
c) increase in supply of houses causes a fall in prices"
People cant afford their repayments because they got mortgages that they couldn't really afford, and as a recession starts to take hold and income dries up they'll have to sell for less than what the house is worth or get repossessed. All downward pressures on house prices. This just compounds the problem as then others want to get out of the BTL market since it looks like their investment is crashing. Of course if you've got the money so that you can ride it out then brilliant but for most people this isn't the case.
However, the situation you've described will I'm sure ring true for many
The point is though, that if people got a mortgage they can afford, and have a little breathing space, then dropping prices will mean nothing as long as they are happy to stay in their present location until the equity rises again
Yea like I said somewhere - the people who will suffer are either:
first time buyers who in desperation to get on the housing ladder self assessed their income in order to get a bigger mortgage which they can't afford
the btl market who already had a house, then thought that things can only get better so lets use our savings as a deposit and get a mortgage on this house for 5 years and rent it out and then sell it, only prices have dropped now and there is still a big mortgage to pay.
A lot of the time, if you stay with the same lender it won't be an issue
And lenders are a lot more easy going with remortgages than new ones
Basically, the banking systems of the US and the UK..and probably a lot of the continent are insolvent. That's right, the banks collectively are broke.
The banks have used fractional reserve, basle 2 banking to create a huge amount of money that has been sitting safely in housing stock and various forms of deriviatives ..how much money, I don't hear you ask?
Well somewhere between $400 and $700 TRILLION. That is, the banking system owes hundreds of trillions of whatever the local currency is to all kinds of people and institutions that it cannot possibly ever repay. That is, pensions, local councils, insurers, businesses, bank depositors, savers, bond holders, various states are all owed far more money than there actually is in existence, or in fact, more wealth than the entire globe produces in a year..
At this point there are two options -
1) The banking system fails and all the banks collapse, one after another.
2) The government prints up the money so it's banking friends can repay (technically) all the people they owe. This will cause hyperinflation pretty much everywhere in the western hemisphere.
So far, the governments have been picking option 2. It really doesn't matter which one is picked, because it's a financial collapse either way. In one, however, fat bankers get punished with everyone else, in the other, fat bankers get away with it. Guess which one we are going to get?
What does this mean?
Well, imagine that no one got paid at the end of the month and take it from there. or imagine that everyoen got paid £10,000 extra all at once. It's going to be chaos, and the end of 2008 and the start of 2009 will see the actual effects of what is likely to become the second great depression come through -
Mass homelessness, mass unemployment, currency devaluation, bankruptcy for your friends and families, maybe even you, prices of basics like bread soar to new, ever increasingly unaffordable heights, state failures, business closures, pension fund failures, "privatised" utilities will stop operating and so on and so forth. Like I said, imagine no one gets paid at the end of the month and go from there.
Anyhoo - do not take my word for all this, check around on the web, there is plenty of info on this knocking around and good luck in the next few years.
For more basic goods, take a look at source 2 below. Last summer, Harare's electrical shops were selling widescreen TVs for £20** whilst the prices of bread, milk and all the other basics escalated out of control. When people went out shopping, they were having to do their shop very quickly, because prices went up practically every hour. People were having to carry spades full of banknotes in order to buy a loaf of bread, for fuck's sake! And whilst that source may be from last summer, things sure as hell don't seem to be getting better.
Inflation in Zimbabwe has been hovering around the 20,000% mark for months. In the UK, it's been between 2% and 5%, depending on which indicator you believe. Hyperinflation in the UK? Don't make me laugh.
* Source - Zimbabwe's inflation woes continue.
** Source - Mugabe's price cuts bring cheap TVs today, crisis tomorrow.
I said it would cause hyperinflation, it's not happened yet, but many people know it is coming - see hikes in oil, gold, food staples.
You will see either a total banking collapse or hyperinflation in the UK and US within the next two years. The "it can't happen here" mindset you display is one of the prime reasons why it is going to occur.
I think we will have low, low interest rates and high, high inflation.
Hypernflation -
http://en.wikipedia.org/wiki/Hyperinflation
"inflation exceeding 50% a month."
It's an absolute certainty, unless the banking system collapses.
Sure. Hide it well though, because in massively inflationary environments their is usually a ban on the general public owning any. Might come in handy once everything has calmed down though.
Better to put some long lasting food by and store stuff like candles/shampoo etc and booze/fags for barter if it ever gets that bad.
Better to buy some shares in 'conspiracy-is-us' what with this, 9/11 and Diana they're rocketing up at the moment
Nowt wrong with conspiracy theories, they've kept me entertained for years. The latest one I've found is that John McCain is a real life Manchurian Candidate http://killbuckcreekpolitics.wordpress.com/2008/01/16/john-mccain-the-manchurian-candidate/
Gold was confiscated during the great depression in the 30's, apart from wedding rings and som e other small jewelry. It's a fairly standard move from the people who like to try control the economy.
The chance of a nuclear war is, as ever, almost nil. The whole point of war being to kill the other sides leaders, which nukes can do in half an hour or so. Leaders talk a good fight, but dying in wars is for those stupid people called soldiers and other types of peasants, not those who like to call themselves leaders.
9/11 was an attack on the banking interests of the US by whoever, Diana died in a drink drive smash.
This banking crisis is the most serious in human history.
http://elainemeinelsupkis.typepad.com/money_matters/
http://www.bloomberg.com/apps/news?pid=20601087&sid=axU6WEh13K48&refer=home
Unlike gold backed or other warehousing systems, a fiat money system can provide the pounds to everyone when they are asked for. This is inflationary, even though the banks balance sheets suffer.
An example -
I promise £1 to 95 people because as soon as one of them takes it off me, he spends it with someone else who immediately returns it to my bank so the £1 never leaves me for very long.
One day, all 95 people arrive and want "their" pound. At this point I either -
1) Go bankrupt
2) Make 94 new pounds to hand out.
If I do the second one, we have hyperinflation, because while people might be foolable about the amount of actual money in the system (£1 is on my books as £95, a fiction) reality isn't - the value of money is set by how many pounds there actually are, not how many people think there are.
Looking at my books, it seems that deflation has occured, but that's because I don't record what I do not have.
Anyway, you have been warned, which was my only purpose in posting. This is a real crisis, not solvable and will lead to massive amounts of chaos for all.
Take care.
Depends on your lender.
Most decent lenders won't remortgage above the value of the property.
No, they're really not.
They are?
You really are trying to get a rise out of me aren't you? :rolleyes: