Friday 6 June 2014

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."


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.