"M Holmes" wrote in message
news:fse28r$4pu$1@scotsman.ed.ac.uk...
> In uk.finance Jane T wrote:
>
>> I have been following these events since 2001 and often read your
>> comments
>> and your previous views on the impending credit crunch, which is now upon
>> us, made me (along with other reasons) take on more debt to move up the
>> housing ladder in 2006. Only history will determine if this was the
>> correct
>> decision.
>
> Last year a colleague was getting married and wanted to buy a house. He
> had a long chat to me about the advantages of buying then, or waiting
> out the end of the credit bubble. The thing is that he had no deposit
> and so even if the credit bubble was about to burst right then and he
> wouldn't have to wait ages (as it turned out it was, but even I didn't
> know that in March) he'd have been in no position to take advantage of
> house price falls because with them would come a requirement for
> sizeable deposits as credit grew scarce. For him, it was a case of now
> or never. Only those with cash can wait to take advantage.
>
> Which I suppose reconfirms that what's best depends more on personal
> circumstances than the pertaining financial environment.
>
Glad I'm not in his shoes, he might not have timed the market very well yet
if he can fund his mortgage he should be ok, however he may have problems
climbing the ladder in future.
My reasons for climbing the housing ladder like many others were driven by
growing family. My first house cost about £40k in 1999, at the time the
type of house I moved to would have cost about £80k. In 2006 I sold my
house for about £100k and bought the new one for £160k. So in 7 years the
cost to change had increased by £20k. Admittedly we did get it a little
cheaper than you would expect as it was a little worn.
What I can remember at the time is you predicting how difficult it will be
to obtain credit and someone says during the crash of the 90's that he
couldn't sell his house for half he had paid for it. I could have gambled
and got a better cost to change deal during a downturn but I didn't want the
mega hassle and then I still would have had the credit issue.
Although the house has risen a bit in value, the fact that we are facing a
possible housing crash doesn't matter to me. What matters to me is having a
decent amount of liquid assets to continue to fund the mortgage in any hard
times. I have got to live somewhere and as I see it my paper loss at any
time will be the difference between what my new and old house are valued.
If all houses crash by 50% then my paper loss at the time will be £10k and
this is not factoring in any increase in house and mortgage set up costs.
On the issue of deflation, I think your Austrian need for a proper solution
is hindering your judgement. Although I think we have reached the top as
regards to the banks irresponsible lending, I have a very bad feeling about
the irresponsible lending of the BoE.
Whats your opinion on the possibility of this credit bubble being managed by
the central banks for a considerable time, gradually deflating the problem
as opposed to the big pop that you so desire.
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