Raise interest rates or face economic disaster

Raise interest rates or face economic disaster

www.dailymail.co.uk

Interest rates need to go above eight per cent to control booming house prices, a leading economist has warned.

Martin Weale said that unless the property market is restrained it will suffer a crash, devastating those who look upon their home as their pension.

He spoke out as official figures revealed that average prices are rising by more than £4,100 a month. If they kept up this pace, they would leap by almost £50,000 this year, more than double the average worker\'s salary.

(visit the link for the full news article)

Very alarming for the UK economy, a housing market crash has been on the cards for a very long time.

www.dailymail.co.uk
(visit the link for the full news article)

I can't help but think that we're getting a look at our own fiture. the situation in the U.K. as reported in this article looks too much like what we face here in the States.

It's hard to believe that Alan Greenspan is no longer in charge of the Federal Reserve here in the U.S.

He's already predicted that within a year or so, we'll be looking at Recession.

I'm guessing that will translate across the pond and round the world. Amateur opinion here only.

Who knows what a pull out of Iraq could do.

Raising rates will insure an economic collapse in the age of debt=wealth, where as the average American's savings is as low as it was before the Great Depression.

Better pray for another bubble to overlap this credit/housing bubble.



[edit on 13-3-2007 by Regenmacher]

I work as a loan officer for a direct lender and I see peoples financial portfolios on a daily basis, and I can tell you that it isn't pretty. What I see more so than not are people who make decent money, but are buried neck deep in revolving credit card debt, student loans, unmanageable auto notes, high interest everything, and the vast majority have NO cash reserves. No savings accounts, no 401k's, no stocks or bonds, nothing. The average American citizen is a slave to their debt with no possible idea how to get out of the situation that they are in. They work and work to make minimum payments on credit cards that never go down because they are barely covering the interest (basically flushing money down the toilet) and meanwhile they take out second mortgages, home equity lines and other credit cards with higher balances to try and absorb the debts that they already have. These people are trying to live way above their means and are financially doomed. I would say the average American is between $15K-$50K in credit card debt with an average savings /cash reserve of less than $3000. They are living paycheck to paycheck, refinancing when their equity will allow it (which will no longer be an option with these new tighter guidelines) so that they can pay closing costs to basically shift debt from one place to another.

Understand that the mega corporations, the giant credit card lenders, they have you by the b***s and that has been their intention the entire time, the system is set up and designed for you to fail!! The house of cards is now set to tumble.

Thats the scary part, too many americans rack up debt and coulndt care less because for some, their debt will be shifted to others. As this process continues, interest rates will climb causing long period outstanding debt to grow larger and increase the strain on the american worker and the banks will have difficulty re-cooping their debts. Eventually, some of the banks may force foreclosure. We arent quite to that point yet, but its coming.

At the same time, you have to consider that raising rates will force a slowdown in the housing market. This too has its detrimental affects. For one, with less new business, lenders might become more agressive in forcing delinquent homeowners into foreclosure so they can raise revenues. Let's not forget that the bottom line is what is going to matter to these huge lenders, particularly those that are publicly traded.

Foreclosures are now at an all time high .

The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.

The percentage of mortgages that started the foreclosure process in the final quarter of last year rose to 0.54 percent, a record high. The previous high, 0.50 percent, occurred in the second quarter of 2002 as the economy was recovering from the blows of the 2001 recession.

This is nothing compared to what will happen if rates go up. Think about all those people with adjustable rate mortgages that might be coming up for their initial adjustment soon. Typically the first adjustment is usually at the maximum adjustment allowed per the terms of the loan. If people cannot make the new payments they might shop around for a cheaper mortgage and refinance. But, if rates go up and lenders charge more for money and tighten controls on whom they issue new loans to, those people might not get a new loan and soon will be at risk for foreclosure.

Predatory lending is something you used to hear about with regards to credit cards. I think you'll soon be hearing that term applied to mortgage lenders as well. If you ask me, that's really what an interest-only loan or a nothing-down and sink the closing costs in loan are.



[edit on 3/13/2007 by titian]

The old guys who sit on the Fed board don't actually remember what it was like to work for a living, if they ever did. They'll make decisions that will be good for Big Money. that will mean a rise in interest rates in an effort to make some of the bad debt "go away."

Originally posted by BlackOps719
I work as a loan officer for a direct lender and I see peoples financial portfolios on a daily basis, and I can tell you that it isn't pretty. ...

These people are trying to live way above their means and are financially doomed.

Yet you still loan them money?
Do you actually try and turn people away?

Not trying to attack you personally, but the lender is just as much to blame and I'm interested in knowing why a loan officer would lend money to someone they know should not be borrowing.
.

It will be another ugly morning as it has been in Europe and Asia already. Every major foreign index is down almost 2%.

There was a time when having a credit card was a priviledge. Now anyone with a pulse can get credit. The lenders are not the only one to blame. People refuse to live within their income. Get it all now and pay later.When they defualt the loss will be passed on to the people that pay their debts. When those people can't carry that load we will have another great depression. Everybody will be broke again and the cycle will restart.

Originally posted by fiveangelsfrank
There was a time when having a credit card was a priviledge. Now anyone with a pulse can get credit. The lenders are not the only one to blame. People refuse to live within their income. Get it all now and pay later.When they defualt the loss will be passed on to the people that pay their debts. When those people can't carry that load we will have another great depression. Everybody will be broke again and the cycle will restart.

Have you ever heard the expression water (or other dangerous substances) flow downhill?

In this instance, it is credit. If a lending institution, empowered by the U.S. Government and enabled by Federal Reserve initiatives to "excite" the economy is given the chance to lend to marginal borrowers - who do you think is gonna be handed the sticky wicket here?

People who are looking to put food on the table sometimes as individuals are led into consumer patterns by a multitude of influences...all of them just one more water droplet of Chinese Water Torture on their already high stress day. Tell me with all honesty that you believe a gigantic entity of a Chase bank or a Citicorp is on par with John Q. Public and his family of five? Tell me that you believe in your heart of hearts that credit is issued to "idiots" who blindly take whatever opportunity comes their way because they don't see what's wrong with it.

In my humble honest and quiet opinion, it is the responsibility of a corporation who has no qualms sending millions of dollars to Washington D.C. lobbying for their industry to at least look out for the landscape it happens to be trampling with its business practices.

All I see here in many cases as consumer (and I can't speak on behalf of the credit companies) are credit issuers who are more like Godzilla than the Jolly Green Giant.

Get a grip on reality.

People need to act like adults and realize that at some point money they barrow needs to be repaid. Credit is not free money. They deserve some of the blame.

The whole problem with the housing problem is the game played with the interest rates.

That's whats making the mess we are right now in the US.

Who control interest rates and for what?.

Interest rates is a manufactured controlled lie to make the markets look good and people feel confident when is the right time no for the consumer but for the lenders.

While it plays also with the minds of the consumer making them think that is time to stop spending when the time is right also for the benefit of the lenders.

But right now most American people has lost control of spending.

We the consumers has been played by all this and we have allowed the interest rate game to do this to us unrestricted.

Interest rates benefit the credit card business but is killing the mortgage companies because the game has gotten our of hand.

It's true that this credit fiasco is going to hurt a lot of people. As a praictial matter, this "slide" has another 12-24 months to go before things get truely...sublime. That's potentially 24 months for the average person to pay down their debts. Less owed is less due each month when the bill comes in, and that's a strategy that anyone can grasp.

If I was a retailer, I wouldn't plan on ordering so much inventory this coming holiday season. I think a lot of people are going to spend less. that'll be just one of many wyas in which the economy will slow down. Others will simply put off buying a new house or car, and that'll have its effects. As consumers become cautious with our without credit, the banks will feel it.

Everyone wants a Lexus for Toyota money and the banks gave them a short term way to have that. There were diferent groups of buyers in the market.
The Investors
They saw money and made alot. Most never lived in their property. They are in the best position because they either dumped the home before the fall or they rent it out knowing that they can't lose if they wait.
The trade up
They took the equity they had in their home and moved up a few levels for the same payments. These people have been in the game for a long time. They will refi at a new fixed rate and higher payment. Then get more credit cards to make up the differnce.
The credit criminals
They got a shot at a house.They don't care about being evictieions, repos and services shut offs. They wont pay. They don't care because some one will give them a new loan to burn.
The first time buyer. The ex-renter that was sold on buying a house for what the same as renting. I would bet that they are maxed out and will be the highest group to lose their homes.

Everyone wants a Lexus for Toyota money and the banks gave them a short term way to have that. There were diferent groups of buyers in the market.
The Investors
They saw money and made alot. Most never lived in their property. They are in the best position because they either dumped the home before the fall or they rent it out knowing that they can't lose if they wait.
The trade up
They took the equity they had in their home and moved up a few levels for the same payments. These people have been in the game for a long time. They will refi at a new fixed rate and higher payment. Then get more credit cards to make up the differnce.
The credit criminals
They got a shot at a house.They don't care about being evictieions, repos and services shut offs. They wont pay. They don't care because some one will give them a new loan to burn.
The first time buyer. The ex-renter that was sold on buying a house for what the same as renting. I would bet that they are maxed out and will be the highest group to lose their homes.

Originally posted by BlackOps719
I work as a loan officer for a direct lender and I see peoples financial portfolios on a daily basis, and I can tell you that it isn't pretty. What I see more so than not are people who make decent money, but are buried neck deep in revolving credit card debt, student loans, unmanageable auto notes, high interest everything, and the vast majority have NO cash reserves. No savings accounts, no 401k's, no stocks or bonds, nothing. The average American citizen is a slave to their debt with no possible idea how to get out of the situation that they are in. They work and work to make minimum payments on credit cards that never go down because they are barely covering the interest (basically flushing money down the toilet) and meanwhile they take out second mortgages, home equity lines and other credit cards with higher balances to try and absorb the debts that they already have. These people are trying to live way above their means and are financially doomed. I would say the average American is between $15K-$50K in credit card debt with an average savings /cash reserve of less than $3000. They are living paycheck to paycheck, refinancing when their equity will allow it (which will no longer be an option with these new tighter guidelines) so that they can pay closing costs to basically shift debt from one place to another.

Understand that the mega corporations, the giant credit card lenders, they have you by the b***s and that has been their intention the entire time, the system is set up and designed for you to fail!! The house of cards is now set to tumble.

I am happy to read this! I have been railing on about this for the last five years. I have told anyone that would listen that the economy was not only set for a downturn, but very possibly another depression. Extending these lines of credit to people who either will not pay or lack the means to pay is the whole problem and it is a result of the Federal Reserve and their practice of printing "funny money." It has made things accessible to people who do not have the means to afford it and which has devalued the dollar to the point where it is nearly worthless. The only way to put a halt to this is to issue a new currency on a gold standard and get rid of the damn Federal Reserve. They are the biggest crime syndicate in this country!

Originally posted by Gools

Originally posted by BlackOps719
I work as a loan officer for a direct lender and I see peoples financial portfolios on a daily basis, and I can tell you that it isn't pretty. ...

These people are trying to live way above their means and are financially doomed.

Yet you still loan them money?
Do you actually try and turn people away?

Not trying to attack you personally, but the lender is just as much to blame and I'm interested in knowing why a loan officer would lend money to someone they know should not be borrowing.
.

The company that I work for, we actually have to show a clear and concise net benefit to the borrower, otherwise the loan gets turned down in underwriting. We have to show a payment savings somewhere, if it means paying off additional debt or whatever. Converting someone from an ARM to a fixed rate is considered a benefit. Personally I always try to put a person into a better situation when I do a refinance for them, which is more than a lot of other companies will do. Basically it boils down to this, if the borrower meets all of the guidelines and qualifies for the loan then I cannot stop them from doing the loan. My place is to advise them to the best of my ability in order to help steer them in the right direction. People know what they are getting into and they do it willingly. You can explain the dangers of an adjustable rate mortgage until you are blue in the face, but if a person wants the loan they will sign no matter what.

If you want to see who the crooks are, look at these credit card companies who are soliciting people fresh out of a chapter 13 for new card offers. They hit these people with rates between 14-22% and in fine print they fail to mention that if the payment is one day late that rate will jump to over 30%. They give cards with extremely high limits to people who should not have them. Talk about giving someone enough rope to hang themselves. Rack up $30,000 in revolving credit card debt and see how long it will take you to pay it off, even doubling the payments up. Criminal.