economonkey

Remember that 0.5% emergency interest rate cut last week? The one that was supposed to bring a bit of relief to homeowners and maybe get the mortgage market moving again? Remember that? We only ask because it looks like some of the big mortgage lenders certainly don’t remember it.
The Nationwide announced today that it was […]

If you’re waiting for this whole “property market slowdown” thing to blow over so you can sell your house/buy a house/stop lying in bed awake at night worrying about whether you’ll have to spend your retirement eating nothing but Asda own-brand catfood, don’t expect things to improve any time soon. The news just keeps getting […]

To the surprise of nobody with more than a couple of economics brain cells to rub together, the bail-out / conservatorship / nationalisation by any other name of the US GSEs Fannie Mae and Freddie Mac offered only a temporary reprieve to the markets. Temporary, in this instance, meaning less than 48 hours.
The initial misplaced euphoria from unthinking investors […]

We’ve all read the stories about rising house repossessions, as the people who over-stretched themselves to claw their way onto the property ladder ‘at any cost’ during the boom years suddenly realise that borrowing all that money to buy a property at a wildly inflated price probably wasn’t such a good idea after all. […]

The Guardian has a fairly good summary of the findings of Sir James Crosby’s report into the UK housing market. Although this preliminary report does not make specific recommendations, it does talk about the kind of options which are available to the government if it wants to get the housing market moving again. Most of […]

The big news today is, of course, that mortgage lending has dropped so far through the floor that it’ll soon be burrowing its way to the centre of the earth. No surprises there, houses are still far too expensive for most people and even if you were brave enough to clamber onto the property ladder […]

According to the National Association of Estate Agents, the UK property market is now ’stabilising’ - which, if you cut through the spin, simply means that a few metrics such as the number of sales agreed and the difference between asking and sale prices have remained roughly level for the past couple of months. The NAEA itself […]

Usually on this site I write features about various aspects of the financial system, leaving Lance to concentrate on the current affairs opinion pieces. But it’s becoming increasingly difficult to remain dispassionate.

The financial system is having a bit of a wobble at the moment, rather like that earthquake that hit the UK recently, knocking a few glasses off the shelves and knocking a few minor celebrities off the front pages, at least for a day.

What has been called a ‘credit crunch’, and ignorantly predicted to be ‘over by Christmas’ (though, like the war, nobody states which year), is actually something rather more serious: in all probability it’s a return to normality. Risk is now being priced back into investments, default spreads are widening and, in general, everybody’s paying more for their money.

Which is as it should be. The last five years or so have seen a collective delusion on the part of economists, central bankers (with some exceptions), financial journalists, house buyers and consumers.

Of course interest rates will stay low (never mind inflation). Of course house prices always go up by 10% a year when wages rise by 3% (never mind the impossibility of the maths). Of course it’s different this time (no, it never is). Of course the UK has a miracle economy based on selling financial products and ever more expensive houses to each other, and doesn’t need manufacturing (unlike the Germans, for example).

To use the vernacular for a moment, it was all bollocks.