BUBBLE ABOUT TO BURST?

International Monetary Fund chairperson Christine Lagarde is highlighting that something needs to be done about Britain's housing bubble. The IMF are suggesting either a rise in interest rates, more house building, or a combination of both.

It's Friday. It's financial. It's Friday Financial with JULIAN SAYER.

Mortgage misery on the way for millions.

This week I want to give a quick recap on what's been happening since I started writing this blog back in February, both on the subjects I have covered, and geographically around the world.

First domestically. A few weeks ago I covered the problems building up in the housing market, and it looks as though it will become even worse than I had feared. The Bank of England even admits a housing bubble is forming, the bubble is out of control and when it bursts it will cause misery for all involved. This is the concern for millions, and if it does it will so damage the UK and its economy over the rest of this decade. This paragraph was taken from the article below which is well worth a read:

"The independent think tank raised the alarm about the most vulnerable 770,000 households already with mortgages, saying they were “doubly exposed”. Typically, they might have very low equity in their home (less than five per cent), might be self-employed or have an interest-only mortgage, making them less attractive to lenders. Secondly, it would take only a relatively modest rise in rates by 2018 for a third of their income to be eaten up by mortgage repayments."

http://www.independent.co.uk/money/mortgages/millions-face-becoming-mortgage-prisoners-as-rise-in-interest-rates-could-trap-to-23m-homeowners-9399137.html

How is this Governments gamble to ride the housing market to stimulate growth for the UK economy going to end? They will have to be very careful, it's already overheating and they have an extremely difficult balancing act ahead, but these housing bubbles don't tend to end well! As a whole the UK economy is growing, but it lacks of any real strength, which means it is very susceptible to outside shocks, and everywhere you look around the world, business is struggling and central banks are panicking.

HOME SWEAT HOME

A young couple look in horror through an estate agent's window at the ridiculous cost of buying or renting a home in Britain today.

It's Friday. It's financial. It's Friday Financial with JULIAN SAYER.

Millions are working themselves into the ground just to pay the the rent

IN EVERY facet of society the working population are finding it harder and harder to get on in life. I have looked at employment, pensions, tax, and inflation, and everything is going against a hard working person. This week I want to look at how difficult it is to get on the housing ladder, and who is benefiting from this artificial market.

Since Margaret Thatcher sold off the council houses and promised everybody should have the chance to own their own house, the UK has fallen in love with home ownership. We have seen over the years just how important the housing sector is to the economy. A booming housing market often means a booming economy. The solicitors, Estate Agents, removal  men, DIY stores, carpet shops to name but a few all benefit enormously when house sales are high. It's been an important part of this Government’s economic policy to try to help get the housing market moving again after the financial meltdown back in 2007.

After the 2007 financial crisis, lending changed overnight. The leveraged institutions simply could not get hold of funds in order to lend for mortgages. Employment became harder and salaries reduced and house prices fell. Demand dried up and they simply stopped building houses.

The wealthy were eager to buy every asset that the Quantitative Easing driven, low interest rate environment demanded. Housing is back in demand. With demographics, immigration and a reduction in supply, there is a huge shortage of houses.

The Government even realised there is a problem;

http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/social-reform/housing-supply-and-demand/

The problem is that with supply failing to keep up with demand, rents are rising faster than incomes in some parts of the country, meaning that a higher proportion of people's wages are spent just keeping a roof over their heads.

CAPITAL PUNISHMENT

Rising London property prices bringing misery to millions

 byHARRY BLACKWOOD

ONE of the most accepted signs of madness is hearing voices inside your head. These voices generally tell the affected person to do irrational things that could be easily described as mad.

Well, all over the country - but especially in London and the South East of England - there are people who are very obviously mad. There are voices in their heads that are telling them that now would be a good time to buy a house. As crazy as it sounds, they are doing precisely that. It's madness of the type that affected The Dutch in the 17th century when tulip mania gripped the country and tulips were changing hands for thousands of pounds.

The UK equivalent of this form of madness can be seen every day on the streets of London where very ordinary houses are changing hands for more money than the average person will earn in a lifetime. What's more, this gross stupidity is belong encouraged by the government with the BBC, as usual, acting as chief cheerleader.

The government wanted to create a housing bubble in a desperate attempt to mask the dire state of Britain's economy, but they saw that there was a major problem: lenders unwilling to grant mortgages much above 80% and potential buyers being unable to save the massive amount of cash required for a deposit. Enter stage far right the Help to Buy Scheme.