Repossessions to rise when interest rates go up

[Fruitloop]

Japan is pretty vulnerable at the moment, but not in remotely the same way as the UK. I reckon the chances of a long-term deflationary period in the UK are pretty remote (and along with it a period of low interest rates). Not that it's impossible, I just thing it's being boosted in some quarters to justify QE/stimulus to a level not commesurate with its actual probability.

Generally when bankers get in beforehand with unpopular shit like this they are usually pretty serious about the event actually taking place. In strictly economic terms (i.e. if you have no soul) he's probably right, that special measures to prevent mortgage defaults might well be counterproductive. If you don't do that though, you have to finally deal with the absurdities of the housing 'market', and there's no more political will to do that atm than there ever was.

 

[kabbes]

The only reason to do that is if they are forced to to defend the pound, isn't it? It doesn't look like they care about the pound. What reason did they give?

All sorts of reasons that, frankly, all fundamentally come down to a mystical belief that interest rates are "naturally" higher than their current rate.

 

[love detective]

It is anachronistic for any govt to lend at a lower rate of interest than it borrows at, which is the current state of affairs

To whom is the Japanese state (which has a gross debt/gdp ratio of around 200%) lending to at lower levels than it currently borrows at? The main 'lending' the state is doing is in its holding of foreign currency reserves (as a result of its strong trade surplus) which are likely to yield more than it pays on japanese govt bonds that it's issued

I don't Really agree with your point about national debt either, it doesn't matter who buys the debt, it's still state debt. Just because the private interests who hold it are based in the country of issue doesn't change the nature/substance of it (although it does make them less exposed to capital flight, bond market 'vigilantism' etc..).

 

[littlebabyjesus]

I reckon the chances of a long-term deflationary period in the UK are pretty remote (and along with it a period of low interest rates).

Why? So far we've had three years of the low interest rates and there's no real sign that conditions have changed significantly since the start of that three-year period. Why would there not be another three-year period? And another after that? What is the empirical basis for what you say here?

 

[ViolentPanda]

Banker in 'totally different definition of love to the rest of the world' shocker.

Oh come on, weeps. These are blokes and lasses who'd sell their own kids if it boosted the bottom line. We'd be shocked if the fuckpigs acted human!

 

[littlebabyjesus]

I don't Really agree with your point about national debt either, it doesn't matter who buys the debt, it's still state debt. Just because the private interests who hold it are based in the country of issue doesn't change the nature/substance of it (although it does make them less exposed to capital flight, bond market 'vigilantism' etc..).

It matters hugely who buys the debt. If UK pension funds hold a significant chunk of the debt (which they do - I believe it's something like a third), that is an entirely different proposition from, say, Chinese organisations holding it. That is simply a method of funding pensions (a bad one imo, but not an illogical one) where instead of paying pensions from direct taxation, the govt pays them through paying interest to pension funds.

The reason Japan isn't in a debt crisis is because most of its debt is owed to Japanese organisations and funds. It's when your debts are owed to people outside your system that you need to start to worry.

 

[ViolentPanda]

That's what your mum said.

She said that to you?

All she said to me was "fuck me harder and slap me about, master".

 

[g force]

Did the experts take into account the rise of people getting longer fixed term loans?

 

[littlebabyjesus]

Did the experts take into account the rise of people getting longer fixed term loans?

The 'experts' are trying to sell people longer fixed-term loans at far higher than current standard variable rates. You always need to look at the vested interests in these cases, because they are lying when they say that they can predict the future but you need to know exactly what variety of lie it is.

 

[FreddyB]

How many mortgages are three or more months behind payments at the moment?

 

[Ae589]

All sorts of reasons that, frankly, all fundamentally come down to a mystical belief that interest rates are "naturally" higher than their current rate.

The natural level is the level at which lenders can make money. Too high and people won't borrow, too low and they can't make money.

The level set by a central bank is just made up crap.

 

[littlebabyjesus]

The level set by a central bank is just made up crap.

That's not actually true, you know.

 

[spacemonkey]

It matters hugely who buys the debt. If UK pension funds hold a significant chunk of the debt (which they do - I believe it's something like a third), that is an entirely different proposition from, say, Chinese organisations holding it. That is simply a method of funding pensions (a bad one imo, but not an illogical one) where instead of paying pensions from direct taxation, the govt pays them through paying interest to pension funds.

The reason Japan isn't in a debt crisis is because most of its debt is owed to Japanese organisations and funds. It's when your debts are owed to people outside your system that you need to start to worry.

Any ideas how much of the UK debt China currently holds? What are the implications, and what are the implications if they buy a larger percentage over the coming decades?

 

[littlebabyjesus]

Don't know. I do know that over half the UK's debt is UK-owned. Butchers has posted links to a good website with this information on it. Can't remember what it's called .

ETA:

Don't believe much of the hype about the debt crisis, though. The elevation of the UK's debt into a 'crisis' is a convenient cover for cuts and the directing of wealth from the poor to the rich. In reality, a large chunk of the debt is from QE - a slight of hand essentially in which the government owes itself - and another large chunk is owed to UK investors. The amounts owed to foreign investors are entirely manageable at the moment. Because interest rates are lower, the current debt servicing bill in the UK (about 60bn a year, I believe) is lower as a percentage of GDP than at any time during the Thatcher government.

There is a hell of a lot of disinformation and half-truths flying around about this.

 

[Ae589]

That's not actually true, you know.

Let me rephrase:
The level set by a central bank is the best a small group of people can do given the limited amount of information a few people can interpret, and given they are attempting to predict the future, and given the political pressure they are under.

The level set by Greenspan led to the enormous property price inflation we saw in the US, and in most other places, and hence had a large part to play in the subsequent crash.

 

[100% masahiko]

How many mortgages are three or more months behind payments at the moment?

Dunno, what are the figures?

http://www.bbc.co.uk/news/business-13943844

 

[love detective]

It matters hugely who buys the debt. If UK pension funds hold a significant chunk of the debt (which they do - I believe it's something like a third), that is an entirely different proposition from, say, Chinese organisations holding it. That is simply a method of funding pensions (a bad one imo, but not an illogical one) where instead of paying pensions from direct taxation, the govt pays them through paying interest to pension funds.

You do know that the pension funds who hold the UK Debt are private, not public, pension funds? i.e. those who pay pensions to employees of particular private companies (i.e. they are exclusive) based on a combination of employee and employer contributions along with market returns (if their lucky). To compare this kind of pension with the state pensions that are funded directly from direct taxation in an intra-generational transfer is bizarre. They are two completely different things. You can't say that private pension funds holding UK debt is an alternative to the UK state paying pensions from direct taxation - they are two completely separate things and both happen at the same time, they are not interchangable as different options for the same purpose, they are different methods for different purposes.

This notion that just because your debt is owned by a private interest which is domiciled in the same country as that who issues it means that it's not really national debt, portrays a pretty naieve view of private/public interests combined in some kind of perfect co-operating harmony. I already stated in my initial post that a largely domestic holding of your debt makes you less exposed to capital flight & bond market vigilantism, however the idea - which you expressed in your first post - that it's not really debt is bizarre. It is debt.

(also you skipped the first part of my question to you, what did you mean by that?)

 

[littlebabyjesus]

The distinction public/private is far less clear-cut than you make out, as the recent bank bailouts illustrate.

And I disagree about pensions public/private - they are different methods for the same purpose.

 

[Fruitloop]

Why? So far we've had three years of the low interest rates and there's no real sign that conditions have changed significantly since the start of that three-year period. Why would there not be another three-year period? And another after that? What is the empirical basis for what you say here?

Well I guess I am coming from the point of view that we have had 7-odd years of fake boom based on financial tinkering, followed by a couple more of bogus recovery in which industrial output is static while inflation is going on on the back of liquidity from out-of-control HFT robots, the doomed giant of the USD and the upstart monster of the RMB are locked together like two drunks both expecting the other to hold them up, investment keeps tightening the screws on the state and eurozone banks are in crisis. So whilst there's no crystal ball to say whether bond blowout, stagflation or whatever (insert disaster scenario of choice here) is the more likely option, the likelihood of the current degree of tension simply being held in the balance is pretty low.

It's not a marble in a bowl, it's a pencil standing on its end.

 

[Fruitloop]

Don't get me wrong here; the supposed 'crisis' is not a real crisis, it is a cover for class warfare. The crisis that is coming is a crisis for the working and middle classes - capital is already hedged against a disaster of its own making.

ETA: what this means to a certain extent is that in purely class terms, it's not particularly relevant how it goes down economically, the results for working people will look pretty similar. All that governments can do at the moment is attempt to cushion the landing, but what they have demonstrated is that they are only interested in doing that for investor casualties, not for their actual electorate.

 

[love detective]

Don't believe much of the hype about the debt crisis, though. The elevation of the UK's debt into a 'crisis' is a convenient cover for cuts and the directing of wealth from the poor to the rich.

I'd imagine everyone here knows this.

In reality, a large chunk of the debt is from QE

You need to learn a bit about what QE is (especially in light of your comments about disinformation and half truths). QE doesn't increase the official state debt (i.e. issued debt), it merely transfers its ownership from private interests to the central bank, meaning less debt is owned by private interests (and when it's unwound, the ownership will also unwind leaving it back in private hands)

another large chunk is owed to UK investors.

As previously stated, this makes it less subject to capital flight & bond market vigilantism, but other than that - the national flag draped around the private interest that owns the debt is pretty irrelevant - it's debt that pays a coupon and has a principal that must be repaid, regardless of the nation of the private interest who holds it.

The amounts owed to foreign investors are entirely manageable at the moment. Because interest rates are lower, the current debt servicing bill in the UK (about 60bn a year, I believe) is lower as a percentage of GDP than at any time during the Thatcher government.

The point is that the amounts owned to any investors is managable - this desire to chop up the debt and say this bit here doesn't count because of X and this bit here doesn't count because of Y, leaving a bit left over which is managable is counter-productive. The argument should be that all of the UK debt is manageable/sustainable, full stop.

 

[love detective]

The distinction public/private is far less clear-cut than you make out, as the recent bank bailouts illustrate.

er, the bail out shows exactly that there is no harmonious fusions as you suggest - instead it shows the complete reverse - instead of the harmonious unity you suggest, it shows that one is screwed for the benefit of the other

And I disagree about pensions public/private - they are different methods for the same purpose.

go on?

 

[littlebabyjesus]

Where did I say there was haromony?

and no, I'm not going to 'go on', thanks. You've misrepresented my posts and views enough already.

 

[love detective]

That's not actually true, you know.

I agree with him, but not for the reasons he states

 

[rorymac]

Sorry to just ask a question with nothing to contribute but I'd appreciate you guys' opinion on whether now would be a good time to get a remortgage on a house ?

 

[love detective]

Where did I say there was haromony?

you said debt is not really debt if it's owned by someone who happens to share the same nationality, i.e. -1 +1 = 0, i.e. no debt, therefore no problems related to having debt.

and no, I'm not going to 'go on', thanks. You've misrepresented my posts and views enough already.

Fair enough, if you can't back up your baseless assertions there's little point engaging in discussion with you.

Although to resort to a sqeal of 'misrepresenting my posts' is a bit of a cop out

 

[Fruitloop]

Now is a dangerous time to get a remortgage on a house. Opinion is seriously divided amongst so-called experts as to whether interest rates are going to stay low or go through the roof. I guess if you can still afford it even if they go sky-high then why not, although if I owned a house and had no mortgage on it I would probably be congratulating myself now rather than taking on extra debt.

 

[littlebabyjesus]

you said debt is not really debt if it's owned by someone who happens to share the same nationality, i.e. -1 +1 = 0, i.e. no debt, therefore no problems related to having debt.

Again, a misrepresentation. Sorry, you tire and bore me.

 

[love detective]

if you post shite on a public messageboard, don't get the hump when you're called on it

 

[rorymac]

Now is a dangerous time to get a remortgage on a house. Opinion is seriously divided amongst so-called experts as to whether interest rates are going to stay low or go through the roof. I guess if you can still afford it even if they go sky-high then why not, although if I owned a house and had no mortgage on it I would probably be congratulating myself now rather than taking on extra debt.

Cheers for that Fruitloop.
I remember kabbes posting some while back that this recession was the same as any other and things would be as they were in a few years (that was the gist as I remember it but sorry if I got that wrong) .. just wondering if he still thinks that or if it's different this time even in the capitalist scheme of things ? Feels to me like there's no way interest rates can go up in the current climate but I'm clueless re the ins and outs etc. I wouldn't want to remortgage my house as a money making exercise but as a means of survival and I imagine lots of people are in the same boat .. it'd piss me off to think that there are sharks out there who knew what was going to happen and made a whole load of more millions out of other people's suffering and never gave a fucking shit about anything other than their own wealth.
I hope those fuckers haven't a clue either and at least you'd have to give them credit for having the bollocks to gamble or summink.