Increasing mortgage interest, falling housing market

Increasing mortgage interest, falling housing market, property prices dropping on a monthly basis making it difficult to sell homes

The housing problem has to be so simple to understand we can't comprehend why the government and banks didn't foresee the crisis coming. Nothing can continue to rise continuously without pricing itself out of the market. Increasing mortgage interest rates exacerbates the problem of falling house prices and property prices had become so over inflated a major adjustment was always on the cards.

Start of article about rising mortgage costs.

Property prices are hugely over inflated and should and could never have become so highly overpriced without irresponsible and highly questionable behaviour by banks and estate agents that has gone unpunished. The type of behaviour we have seen from politicians and bankers has been on such an incompetent level it is verging on the criminal and property prices need to come down to a level where the market can start to recover at a more sensible and modest pace.

This will allow first time buyers to move back into the market when property prices have dropped to a more affordable level, the banks have put their lending books back into order and are prepared to lend at a friendlier rate.

Of course there are going to be victims on all sides. Repossessions are going to increase to unprecedented levels, dumping more properties back on the market and pushing property prices down even further. Buy to let landlords cannot get the rents they need to cover their mortgages, or are no longer able to remortgage themselves out of trouble and are trying to sell their portfolios. Property owners are sitting on properties with negative equity with fixed rate mortgages coming to an end and unable to afford the new mortgage rates and that is if they can get an offer of a new mortgage. Property prices are likely to fall on a month by month basis for at least the next eight months. Even by repossessing a home, negative equity is going to ensure that the lenders rack up enormous losses with some going bust. The situation is not going to improve until the market touches ground zero.

THE MORTGAGE MARKET EXPLAINED

Let's explain the problems so that even the directors of banks and government ministers can understand the situation they have got themselves into. There is little point in the government blaming the banks and the banks blaming the government, like the biggest idiots, they are too stupid to understand just how unintelligent they are.

The UK economy is like any business that has to be run at a profit and financial services is one very important part of that structure. The economy needs to turn over money to keep all parts of the machinery moving and most of this money has been borrowed by individuals and leant against property. The banks in turn have been borrowing the money they were lending and securing it against property that was constantly increasing in value.

Fuelled by the demand, lenders kept lending more and borrowing more but the money they were lending was guaranteed against something that was being overpriced and had to, at some point out price itself. In other words, property prices climbed so high the market couldn't be sustained and buyers and tenants for those properties could no longer be found.

Of course the demand was still there but first time buyers could no longer get on the property ladder. The first few rungs were broken and couldn't be reached by the average person in the street. It wasn't an organised revolt, it was a drought that hit everybody at the same time and without discussion, the very market that was feeding the demand dried up.

It started in the states as we predicted nearly two years ago but because US banks lend money to UK banks, they became wary about lending money secured against UK property and suddenly the banks could no longer borrow money on the LIBOR. Northern Rock were not the only bank in trouble, they were just the bank we learned about.

So now the banks had and still have a problem. The very thing that guaranteed their loans was no longer cast iron, buyers were pulling out of the market, borrowers were reneging on loans and the books were no longer balancing. Now, because of their own actions, they are reporting that property prices are falling.