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subprime crisis


rav4
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Using Base Rates as the sole moderator always was an idiot concept.

Using other mechanisms (such as Special Deposits AKA The Corset) is

much better.

IMHO the B of E ought to have invoked the Corset some years before unsecured personal loans reached their epidemic proportion.

But then again, if both the B of E and the FSA had have been doing

their jobs properly, the Northern Rock fiasco would never have happened

since they would never have been allowed to build up such a negative

liquidity position, if their Liquidity Ratios had been kept in balance.

You and I John are obviously monetarists: like the late Milton Friedman.

I thought dear old Milt rather disapproved of things like controlling other people's liquidity positions on the basis that it was an act of government interfering in matters that were better left to the "free" market. Perhaps we would do better to return to a more Keyneian model since it is now abundently clear that the self-proclaimed Masters of the Universe cannot be trusted with the keys to the drinks cabinet let alone control of the world economy?

Still, quite a lot of people did get very, very rich, and for the most part it was only the moronic Sids who got turned over and there are plenty of those born every minute.

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I think we have only scratched the surface of the banking sector losses.  Write off's on ABS's, increased mortgage loss provisioning and increased cost of funds - particularly for those banks facing long term warehousing costs that are racked to escalate with the duration of the facility - while they wait for the market appetite for ABS's to return.....

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All very worthy stuff but how does this help our poster RAV4 decide if they should buy in France now or wait? With our obvious collective experience we should be able to offer some decent advice. Mine is to suggest they wait, watch and move when market conditions change more to their favour. That should not be too long. Rav4 would be interested in your diverse opinions.
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We are seeing a somewhat different picture. We have bought and built several new properties in departments 17 and 66. In 66 we bought apartments along the sea front. early this month we visited them and talked to many estate agents, after getting the standard "the market is static" all of them indicated that the market had fallen between 10% and 15%. In department 17, the fall is actually less at around 10%.

 

In addition to the above, the rental market in both departments has fallen sharply. An example, a house we rented at €650 pm in april 2005, will be on the market soon at €600 pm, another house that was yielding €797 pm at the end of january 2008 is empty and hopefully will be rented at €725 pm, i have other examples, however the trend is the same.

 

We are in the process of moving house, selling our own and buying another, estate agents are demanding we look for a realistic price and on the other side are quite open about the level of negotiation one can expect with the seller.

 

ams

 

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[quote user="J.R."]

Very interesting thread and I am learning a lot from the discussion, which for me is a secondary benefit of forums like this.

But please remember we are not all au fait with the financial terms, what are ABS's, MPC's, and ECB and LIBOR?

[/quote]

ABS:  Asset backed Security. These are what are called Semi-Liquid Financial Instruments, which are if you like a certificate of value which can (in theory!) be bought and sold in the money markets. The banker's term for this is "Securitisation", from the concept that the debt is secured by the underlying asset values.

In the case of mortgages, this is nothing new with one exception: mortgages and indeed HP debts were often rolled up in a bundle and refinanced by the lender in what was called "Block Discounting". The refinancing would be either With Recourse or Without Recourse which meant that the original lender who was "Selling" the debt would be liable for defaults (With Recourse) or would not be (Without Recourse).

The difference with Securitised debt instruments is that the buyer can re-sell and the next buyer can re-sell as well: thus their investment is liquid: to a degree.

Modern banking and investment is all about trying to create high liquidity. For example, if an investor "Locks In" funds for a period, say one year, then those funds cannot be accessed. However, using what is called a CD (Certificate of Deposit), the investor can take advantage of the higher rates of interest that longer term deposits might offer and at the same time, retain liquidity since the CD can be sold. Once again, it is a Certificate of Value (Or in this case of title to the deposit when it matures).

What happened in the Sub Prime fiasco was that the original lenders bundled up high risk mortgage lending with other low risk debt to make the packages more attractive to buyers and often concealed the default risks (which were very high as the lending was to those who couldn't really afford to borrow!).

MPC: Monetary Policy Committee of the Bank of England: who meet normally each month to decide on a number of issues: including money supply and Base Rate.

ECB: The European Central Bank: This is the bank which sets and decides policy for Euroland; in particular, money supply and interest rates.

LIBOR: London Inter Bank Offered Rate. The interest rate at which the London Interbank Market Offers to lend money. This is between fully authorised banking institutions only. It is simply a way of expressing the average market "View" and is used all over the global market as a benchmark.

 

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[quote user="Logan"]All very worthy stuff but how does this help our poster RAV4 decide if they should buy in France now or wait? With our obvious collective experience we should be able to offer some decent advice. Mine is to suggest they wait, watch and move when market conditions change more to their favour. That should not be too long. Rav4 would be interested in your diverse opinions.[/quote]

Good point, Logan.

If faced with the same decision, I think I would carefully watch French property sites for a bit. At the moment, as the last poster states, the market is static and dependant on area, off its peak.

If you do look regularly at property sites then you'll see the same stuff sticking for long periods! And coming down in price.

Wait until it starts to move and try and get in on the rise.

One swallow doesn't make a Summer, however, and often market rises can be temporary and quickly reverse.

There should be some bargains around with Brit sellers who have completed most if not all of the refurb and for certain reasons have to sell up.

For the moment, therefore, hang fire for a bit.

 

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Hi Rav4, we are going out to Brittany at the beginning of March to look for a holiday home.  Now is a tough time to buy, I have seen the pound drop from 1.34 to 1.32 in a matter of days, but hopefully, as other posters say, it may have stabilised.

However, if prices drop further and the pound does strengthen later in the year, then we will have more competition for the properties, so I am going out with the attitude that if I find something which lights my fire- and, of course, that of my OH, then we will put in the lowest offer we think we can get away with.

As the saying goes ... "If your name's on the ticket" ...

 

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I have been contributing to another thread which related to this subject. It seems to have been removed by the mods. If the mods happen to read this post I would like to point out that I believe Ian who originally posted the thread had a valid analysis worthy of discussion. I did not agree with him and I have no idea if he simply wanted to advertise his house for sale. Frankly I don’t care. Cynicism is an easy and lazy way to comment when you have nothing to say. My point is that discussion and debate should be free and unfettered. Within obvious bounds of decency, legality and legibility of understanding. I do not believe it’s the job of mods to censor debate.

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....And I'd like to point out that the thread was removed for review by the administrator  after several members had voiced their concerns. It may well return. 

The correct way to comment is to contact a mod, not post on open forum, which is actually contrary to the Code of Conduct.[:)]

Please can we get back to the topic of THIS thread.

Thanks

 

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For various reasons (which I am scared to comment on for fear of criticism ... ) I am a net-seller of real estate in UK and a net-purchaser here in France at the moment.

France is both my home and a place where I own investment property (real estate).  One needs a home somewhere and I would recommend renting or owning here in France (I also love most of the UK, Germany, coastal USA and New Zealand ... but this is a France forum).

For investment property I find it hard to recommend new purchases in the UK (though I do personally own some property there).

I will keep my own counsel on my reasons because I know my views offend some members. 

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[quote user="Ian"]For various reasons (which I am scared to comment on for fear of criticism ... ) I am a net-seller of real estate in UK and a net-purchaser here in France at the moment.

France is both my home and a place where I own investment property (real estate).  One needs a home somewhere and I would recommend renting or owning here in France (I also love most of the UK, Germany, coastal USA and New Zealand ... but this is a France forum).

For investment property I find it hard to recommend new purchases in the UK (though I do personally own some property there).

I will keep my own counsel on my reasons because I know my views offend some members. 
[/quote]

ah ah ah! So you are an 'immo', I knew the photo wasn't lying[blink]

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Artsole: No I am not an immo' (haven't we had this conversation before????).....not that there's anything wrong with that (Seinfeld reference)

A former neighbour of mine said I reminded him of a Channel 4 TV (UK tele) presenter who does property searches for people (though that was more personality than looks I think) . I am neither nor have I ever been an estate agent, property search agent or TV presenter.

I am happy to mention my profession - but I guess I'd be accused of "advertising".  Email me and I'll tell you!

Anyway as RH suggested back to the topic...

Perhaps I should add I am in the asset-building stage of my life (I'm in my 30s) and therefore climbing up the property ladder.  For those members for whom their 30s are a distant memory or are downsizing your priorities will be different. For those of us going up the property ladder, falling prices are of course good news.  For those downsizing I would guess you'll be wanting to do it sooner rather than later.

I take the view that saving or investing now during my (arguably) peak earning years will (thanks to the compounding effect) mean I have a reasonable nest-egg when I am of that more senior age.  Many people wait and wait and wait before making their investments for their old(er) age....sometimes they wait way too long. 

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[quote user="Russethouse"]

....And I'd like to point out that the thread was removed for review by the administrator  after several members had voiced their concerns. It may well return. 

The correct way to comment is to contact a mod, not post on open forum, which is actually contrary to the Code of Conduct.[:)]

Please can we get back to the topic of THIS thread.

Thanks

 

[/quote]

But, nevertheless, quite a reasonable comment from Logan - IMHO

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[quote user="Gluestick"]ABS:  Asset backed Security. These are what are called Semi-Liquid Financial Instruments, which are if you like a certificate of value which can (in theory!) be bought and sold in the money markets. The banker's term for this is "Securitisation", from the concept that the debt is secured by the underlying asset values.

In the case of mortgages, this is nothing new with one exception: mortgages and indeed HP debts were often rolled up in a bundle and refinanced by the lender in what was called "Block Discounting". The refinancing would be either With Recourse or Without Recourse which meant that the original lender who was "Selling" the debt would be liable for defaults (With Recourse) or would not be (Without Recourse).

The difference with Securitised debt instruments is that the buyer can re-sell and the next buyer can re-sell as well: thus their investment is liquid: to a degree.

Modern banking and investment is all about trying to create high liquidity. For example, if an investor "Locks In" funds for a period, say one year, then those funds cannot be accessed. However, using what is called a CD (Certificate of Deposit), the investor can take advantage of the higher rates of interest that longer term deposits might offer and at the same time, retain liquidity since the CD can be sold. Once again, it is a Certificate of Value (Or in this case of title to the deposit when it matures).

What happened in the Sub Prime fiasco was that the original lenders bundled up high risk mortgage lending with other low risk debt to make the packages more attractive to buyers and often concealed the default risks (which were very high as the lending was to those who couldn't really afford to borrow!).[/quote]Sounds like the financial equivalent of smoke and mirrors to a simple fellow like me....[blink]

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I'm clueless when it comes to money but here's my clumsy take on things anyway.

The UK housing market has exploded in recent years, is beginning to stall and will decline.

The French market - if we're talking village houses, fixer uppers - has exploded too thanks to foriegn buyers (5k houses the French didn't want that are now worth more like 50k and have been for a few years now, certainly where I live).

The French economy, meanwhile, has been and continues to be garbage whilst the UK's economy has been relatively booming.

If Thatcherite/Blairite Sarkozy achieves his aim of turning France into Britain (economically/socially speaking) then French house prices should gradually rise: more jobs, less stringent employment control, increased consumer confidence and a whole different attitude towards credit and buying.

So, we might see a boom in new builds and young French couples that traditionally rent until they have a hefty deposit to put down might fall into the trap of borrowing huge sums with tiny deposits. I'm guessing that a lot of those old village houses may be bought up by French youngsters with new-found job security, then sold on when they can afford the dream new build. (The French people I know don't currently play this game).

Either that or the French economy will remain stagnant and the housing market will be pretty stable for some time to come.

My advice would be to market your UK house at the projected  price for the end of 2008, let's say 10% lower than it 's 'worth' now. Bank the cash, assuming there is any. Rent in France. When the exchange rate improves (if it does) transfer the money over and maybe buy in France. If, on the other hand, you don't fancy France as a long term bet after renting then you can go back to Blighty and buy your old house back cheap at auction after the crash. Sorted!

 [8-)]
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[quote user="Bones"]
My advice would be to market your UK house at the projected  price for the end of 2008, let's say 10% lower than it 's 'worth' now. Bank the cash, assuming there is any. Rent in France. When the exchange rate improves (if it does) transfer the money over and maybe buy in France. If, on the other hand, you don't fancy France as a long term bet after renting then you can go back to Blighty and buy your old house back cheap at auction after the crash. Sorted!
 [8-)][/quote]

Bones that is the best advice I have read so far. 

Here are more difficulties likely to have negative effects on all property markets. http://www.independent.co.uk/news/business/analysis-and-features/the-next-credit-tidal-wave-785622.html

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[quote user="Alan Zoff"]

Hey, there's a thought. Dispense with reality and reasoned debate and only post things that make everything rosy in le jardin. Problem solved.

I feel better already.

 

 

 

[/quote]

Alan, wouldn't it make you feel better just to say, 'p*ss off'!

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