I love the Credit Crunch

Originally Posted by Biker_Billy

Yep - we are waiting to buy - have a decent deposit, and prices are falling....

just need to wait for banks to start lending now!

+1

Originally Posted by Ed

FS - surely the point is that banks are happy to make huge sums (however you measure it) and pay dividends one minute and equally happy to pass the begging bowl the next because if we don't bail them out we'll all go to hell in a handbasket.

Hypocrisy in the boardroom.

Usual story. Owe a thousand, it's your problem. Owe a million, it's the bank's problem. Owe a billion, it's the government's problem.

I think you have to look at it from the POV that economics is very much like politics. Everyone can pick holes in what's wrong with the system, but there aren't really any viable alternatives that would be any better.

Banks take risks with our money - it's the only way you get any growth. The obvious problem that we're having now is that occasionally people lose confidence and the system takes a big hit. But what's the alternative? Give full economic control to the government? Considering how much national dept we're in, I'd consider Brown far more reckless than anyone in the banking system. At least in the private sector you can take your money elsewhere.

[Paul the 6th]

"only when the last tree has been cut down, and the last river has been poisoned, will man realise that you can't eat money and reciting old proberbs makes you sound like a tw*t."

Banksy, 2007

[Biker Biggles]

Im not an economist,and know very little about its theory,but how come it was blindingly obvious to me that house prices were way too high and a collapse was inevitable?Ive seen this coming for a couple of years and said so,including on here.
The other thing that has been obvious to stupid old me is that our economy, GB ltd, is insolvent and has been for a couple of decades.So is America now,and maybe that is what is really happening in the wide world of capitalism.The so called self styled "experts" have finally realised it too.Thus no amount of government bail outs can change the fundamental economic reality and we are all in the ****.The problem is that somebody else owns the energy,the raw materials and the factories that produce the goods,so when they have had all our money,what are we producing in order to regenerate our wealth that we have just blown?Very little it seems.

[Paul the 6th]

strange how no one did anything to prevent it - even though everyone's been saying it for long enough, experts, neighbours, the news, my mum "ooh they're predicting a massive house price crash next year" ref: my mum, oct 2007.

[Paul the 6th]

oh and isn't the average house price meant to be 5 x the average wage, so if £20k average annual wage = £100k average house price?

The ratio was way out of balance just before all this credit stuff became daily headlines

Originally Posted by Biker Biggles

Im not an economist,and know very little about its theory,but how come it was blindingly obvious to me that house prices were way too high and a collapse was inevitable.

From what I understand, the reason is pension funds. Essentially, US and UK governments ****ed their financial reserves up the wall leaving no government bonds, which would be the normal bedrock of pension fund investment, available for purchase.

Companies providing pensions were then in the predicament of having billions of pounds of savers money that desperately needed investing in something, otherwise there would be lots of skint OAPs. That something turned out to be mortgages.

So, suddenly billions of pounds of credit becomes available to the housing market, which causes the housing boom. Then, as you say, people got the jitters when the prices didn't stop rising. Combined with the sub-prime business mixed into all the mortgages packages that pension providers bought, confidence suddenly took a nose dive and the rest as they say is history.

I wouldn't profess to understand all this in any kind of detail, simply enough to say that it's far more complex than it simply wasn't seen coming.

Originally Posted by Paul the 6th

oh and isn't the average house price meant to be 5 x the average wage, so if £20k average annual wage = £100k average house price?

The ratio was way out of balance just before all this credit stuff became daily headlines

Too right!

I don't understand how the pundits thought that the housing market would continue to grow indefinately. Surely if a couple on an average salary could not afford an entry level home then there was something wrong with the system. First time buyers who supposedly drive the housing market were being priced out by bye-to-let investors and then having to waste money renting instead of being able to save a reasonable deposit ending up being pushed out of the market completely.

I'm amazed how atitudes have changed in less than 20 years. When I first looked at buying a house in the late 80's I had to meet the building society manager to discuss the arrangements. I expressed surprised at all the additional expenses involved as being a first time buyer my budget was really tight. He said to me that if I was concerned about several hundred pounds for whatever expense it was then perhaps I should reconsider whether I could afford to buy a house (I did and decided I had no alternative but to rent.) Last time I needed a mortgage I met with a junior staff member and they just added all the incidental expenses into the package... In retrospect I wonder who had the right idea.

[Paul the 6th]

aye, wish i knew who my bank manager was instead of "jonathon hanley" of the central underwriting unit at hbosbc

You know, when I posted this last night, I really thought you lot would hammer me for being heartless. When I saw 48 posts earlier I was a bit scared to open the thread, but it's nice to see that it's not all doom and gloom out there, unlike what the media would have us believe.

In fact, going by what has been said about bike prices, I'm off to surf for a second bike, always fancied a dirt bike, so I'm going to go and see what I can get!

Good luck to everyone house buying, and fingers crossed that our jobs are ok.