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Tabby
Money Saver
Joined: 17 Feb 2005
Posts: 86
Cash Points ££ 341.40
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 Posted: Sat Apr 22, 2006 4:28 am Post subject: IMF Warns UK housing market is still worryingly overvalued |
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The UK housing market is worryingly overvalued following one of the world's biggest property booms, the International Monetary Fund warned yesterday.
Prices have soared by more than 120pc since 1997, the IMF said in its twice-yearly economic outlook -- far more than countries such as the US. Of eight markets, only Ireland saw a bigger surge in the average home value.
The fund warned the explosion in property prices remains a key risk to the global economy, claiming that 40pc of house-price booms end in "busts."
Britain remains particularly exposed, after an interest-rate cut in August reignited activity.
"The greatest risks appear to lie in the household sector, particularly in countries where housing markets are elevated," the Washington-based fund said. "The United Kingdom still appears quite richly valued."
The warning came ahead of a programme of meetings for finance ministers, including Gordon Brown, in Washington this weekend.
The fund was relatively upbeat overall about the British economy, raising its forecast for economic growth in 2006 to 2.5pc and predicting a 2.7pc expansion in 2007. The UK grew 1.8pc in 2005, the slowest pace since the early 1990s.
Yesterday the Bank of England revealed it voted 7-1 to leave lending rates unchanged this month, saying higher equity prices and house prices, coupled with a drop in the pound, should support the economy.
But the threats of rising oil prices and a possible dollar crash are still hanging over the global economy, the IMF warned.
It said the dollar has to drop "significantly" if the massive US deficit is to be unwound.
Given the scale of the imbalances in the global economy, "there is a clear risk of a disruptive adjustment and a global recession," the fund warned.
Among the other risks is the threat of a bird flu pandemic, which could have "extremely high human and economic costs." |
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housebuyer
Money Saver
Joined: 02 May 2005
Posts: 81
Cash Points ££ 2815.22
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| Posted: Fri May 26, 2006 1:23 am Post subject: |
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29% of U.S. Borrowers in 2005 Owe More Than Value of Home ! !
That seem incredible to me. But the statistics are true. They were released recently by the Fed (U.S. Central Bank) and people are freaking out. The has to do with defaults and foreclosures.
The problem is with exotic loans of all types (option ARMs and interest only loans). Borrowers using option ARM's defer paying normal interest rates for a period, usually two years. The lenders lure people in with 'teaser rates' set far below general rates: 1% to 2.5% rates are common.
If a borrower has a $ 300,000 loan on an option ARM contract at 1%, that means the person owes an additonal 6.38% each year. On $ 300k that means unpaid interest of about $ 17,000 was added to the unpaid principal amount.
This is after the 1st Quater Reporting. 29% in Qtr. #1. May be as high as 40% after Qtr. #2.
Foreclosures in the U.S. are skyrocketing. Every month now, new records are being set.
To make matter worse, interest rates on option ARMs written in 2004 will reset at current rate this year. Next year, option ARMs written in 2005 will reset. Payments increase overnight from about $ 700 a month to over $ 1,600. More foreclosures will surely result.
Report is posted on NewsPundit.net: http://newspundit.net |
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Flash
Stranger
Joined: 06 Feb 2005
Posts: 8
Cash Points ££ 140.80
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| Posted: Fri Jun 09, 2006 1:37 am Post subject: |
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If the housing market is so over valued then why is it still rising ?
Confidence still strong in UK housing market
5 June 2006
Brits are increasingly confident to take on mortgage borrowing, particularly to move home, according to Alliance & Leicester’s Borrowing Monitor.
At the beginning of this year 7% of households said they were thinking of moving, buying a property for the first time or remortgaging by mid summer. When questioned recently, 15% of households – more than double the January level – said they planned to do so before next winter. Although not everyone acts upon these plans, the change in intentions underscores this year’s much higher activity levels in the housing market.
The first four months of the year saw a significant increase in new mortgage lending – 28.4% up on the same period last year, although April saw a slight cooling of this trend. By contrast, the number of people remortgaging rose a mere 3%.
The return of the first time buyer
First time buyers accounted for over a third (38%) of new mortgages between January and March according to the CML and the appetite among first time buyers is growing. Alliance & Leicester’s latest figures show that the proportion of under 30s planning to get on the housing ladder has increased by a third since January – up from 12% to 16%.
Affordability remains good
The latest figures show that by the end of April the total value of mortgage debt in the UK was £999.2 billion and rising at £9 billion a month, meaning that it almost certainly now exceeds the £1 trillion mark for the first time.
However, despite record mortgage borrowing, affordability for those taking out new mortgages remains at similar levels to a year ago – and far better than it was in 1990, the year of Britain’s debt crisis. In the first quarter of 2006, for those taking out a new mortgage, interest payments took up 14% of household income – the lowest it’s been since the second quarter of 2004. In 1990 mortgage interest took up nearly double this level – 27%. |
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