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SE1 House Prices Overvalued

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Tuesday 22 April 2008 4.53pm
Whilst this is all genuinely very interesting - I think my issue with it, is the fact there is very little I can do about it all over and above what I'm already doing, i.e. not putting any purchases on credit cards, no stupid purchases of things I don't need, saving as much as possible, keeping my nose clean at work.

In fact - it has occured to me if we all did all of the above is probably a sure-fire way of ensuring an economic downturn.

Aside from that, we can debate the relative vulnerability of our employers, the safety of our cash stuffed in our mattresses vs. in our bank, the possibility of it all going arse over tit but it all seems a bit Chicken Little to me. I also feel that all this excessive fear could quite probably turn the doomsday senario into a self-fulfilling prophesy.
Tuesday 22 April 2008 9.28pm
If you owe the bank 10,000 it's your problem,
if you owe the bank 1,000,000 it's their problem.
Tuesday 22 April 2008 11.17pm
And taking that truism one step further....

If the bank owes L1,000,000,000 its your problem again i.e. tax payer bailout of the Northern Rock.

I thank you.
Wednesday 23 April 2008 10.57am
Interest rates (apart from the Bank of engalnd's repo or base rate) are going up at the "retail end" of the process, for both individuals and companies. While some people and comapnies may be able to finance themselves out of current earnings many more cannot and need access to working/revolving credit. That is the problem. Higher credit charges affect everyone either directly or indirectly. If you are a net saver then maybe you will be getting a bit more for your money but for those who are borrowers they are paying a good deal more. This will then impact on everyone as companies can't afford to invest as much (or at all) as previously they might and individuals have to rein in their spending. In many cases this may be a good thing after the spending binge of the last 5 years but it will impact on all aspects of the economy and no-one will be insulated.
Wednesday 23 April 2008 12.28pm
With inflation, then cash under the mattress will rapidly become worthless. I'm sticking to bricks and mortar as whatever happens I'll still have them.
Wednesday 23 April 2008 2.17pm
Goodness, you lot don't know how lucky you are. Over here in New Zealand, interest rates on mortgages are 9% - 10%. My IFA over here can't believe how low rates are in the UK.
Wednesday 23 April 2008 2.26pm
Low interest rates - 'because' of low inflation - do not make houses cheaper. It is an illusion.

With 10% inflation the value of your debt halves every 7 years. With 2% inflation it takes 35 years to achieve this miracle.

In terms of affordability, house prices will move so that one third of your post tax income is spent on interest costs.
Wednesday 23 April 2008 4.05pm
And of course you have to decide how to measure inflation....CPI, HICP, RPI, RPI-X or Y and several more too. And when you have decided on one there is the problem that these are all useleass as everyone has an individual personal spending pattern, and that is the problem with our current system. The government's preferred measure (CPI) just doesn't feel representative to the great majority of people for their own experience of higher prices over the last few years, with its focus on durable goods (which have been falling due to globalisation) and its lack of input for house prices/costs and daily service charges.
Wednesday 23 April 2008 4.09pm
oops - the beads just dropped off my abacus ))
Wednesday 23 April 2008 6.33pm
The government's preferred measure (CPI) was invented because they felt that RPI was too high.
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