Disappointment and understanding

I just loved this paragraph from last week's press release from the Council of Mortgage lenders:

“We understand the conflict between slowing economic growth and rising inflationary pressures, and the uncertainty over some of the data reflected in the split views of MPC members last month. However, the MPC had an opportunity to act to anticipate the worsening economic environment today, and it is disappointing that there has been no change. "

Despite feigning understanding about inflationary pressures, the CML remain disappointed that the Bank of England didn't cut rates. The worsening economic environment would be made much worse by a cut in interest rates. Inflation is rising extremely fast right now. A cut in interest rates would exacerbate price expectations and lead to further difficulties down the road.

Disappointed! Whatever!

The estate agent bubble is crashing

The BBC reports:

"About 150 estate agents' branches are now closing every week in the UK, according to research. Business monitor Debtwire said the number of branches had fallen from 13,000 to 12,000 so far this year."

I could never understand how all those estate agents could survive. In London, they popped up like a plague. Every High Street seemed to have four or five. Now that the market nose-diving, it is hardly suprising that it is taking down 150 estate agents a week.

Fat cat rescue

A cartoon that says it all.

(picked up from housing panic)

Building societies begin to shrink

Today, the guardian reported:

Mortgage lending by the UK's building societies has slumped by more than £1bn, according to new home-loans data. Building societies advanced net loans of just £580m in March, down from £1.8bn in the same month last year.

The 68% decline means that building societies are scaling back lending as a result of the credit crunch even more severely than major mortgage bank rivals, such as Halifax and Cheltenham & Gloucester.

An unsurprising story; building societies were always more susceptible to the credit crunch since they had a smaller depositor base and a greater dependence on wholesale financing.

For the same reasons, building societies are the weakest link in the UK banking system. Although the BoE have never stated this publicly, the Special Liquidity Scheme was almost certainly designed with them in mind.

Debtland - living upside down in Australia

Here is an excellent programme on personal debt in Australia. Start at the top and work your way down.

The UK economy

BTL - the madness continues

I checked out a buy to let website - Nice Investments - today. I picked up a few quotes.

"New turn key service means high returns no longer demand huge resources."

"Multi-Let Residential: "This solution is uncompromisingly the best in the market for gaining the highest rental yields and equity growth."

"Example: Canada Water 4-bedroom property; Purchase price is £400K; Re-developed to provide 6 bedrooms: Monthly interest mortgage payment c£2K: Rental income c£4K: Property re-valued at £600K, freeing up cash to buy the next property."

Example: 1 Bedroom Flat in SE1: Market Value 205K: Negotiated purchase price 155K: Full re-furbishment and high rental fit out for 15k: Pre development rental £650 pm: Post development rental £1,050 pm: Revaluation after development £210k: Equity gain after 6 weeks of development £47K. Surplus cash funding next portfolio purchase.

Our unique approach enables us to double standard market rental yields.

So if any project in which you participate fails to return a profit by the end of the stated period, nice investment will return your original sum plus a return of 10% per year for the duration of your investment (not compounded).

Single-Let: The focus here is to achieve payback for an investor within months of purchase.

The promises here are extraordinary; high returns without "resources" (presumably this means investments without any down payments); the highest rental yields, equity growth, and a guarantee of a 10 percent return plus original investment.

However, I failed to find a single warning on this website that said that the value of an investment can go down; that leveraging multiplies the risk of loss, and that there is some risk with property speculation. Check the website out, and see if you can do better than me.