Nightmare: Act II

Mods not sure if this piece should should be moved to sign of recovery or sign of recession or maybe set up a new thread -Armageddon awaits , :open_mouth: … re-act-ii/

The start of the Panic phase will coincide with interest rates rising and property taxes, IMO.

This phenomenon was predicted on here a long time ago, and will finally show up the governments “blame unforseen external factors” approach to appraising the causes of our woes, for the crock that it is. In terms of ordinary people though, it is simply going to cause a meltdown. So many are barely making it at the moment. Voices calling us to leave the euro will turn the volume up.

Leaving the Euro won’t help them though, the money is still owed in Euros.

I suspect NAMA will eventually end up owning a significant portion of everyone thing built after 2002 or so.

Where is the data on how much more people are able to take in the form of tax hikes and interest rate rises?

For example, do we know how many households are spending more than 40% of their take home pay on the mortgage?

I still haven’t been convinced that this is not all part of an orchestrated ruse to encourage people to spend their money now.

My money is in the bank, where it is being loaned to others to spend. Its not sitting there gathering dust you know!

Does this mean we will see an end to those bloody “Cheaper to buy than rent” ads?

Nope it’ll just be “Cheaper to buy than to rent*”

*based on one month teaser rate of 1.2% normal rate 4.5%

By golly, I really feel sorry for a lot of home owners out there now, especially with families and stuck on tracker mortgages. they actually think they are lucky but the real lucky folks are those on fixed interest rates.

This is pretty damn terrifying. If rates went up even a small amount it would tip so, so many people over the edge. Seems to me many people in the country who would consider themselves traditionally well off are now only above water to the tune of a couple of hundred € a month. Tight margins if you have a house and kids and a car and whatnot. A tiny rate rise wipes that surplus out and then those people are right in the shit. And that is not to mention the many people who are at that break-even point already. Really, really scary stuff because I don’t know how you fix a problem that big.

My brother has just finished 2 years of a fixed rate mortgage while interest rates were falling and is now on a tracker at 1.1% above ecb base rate. He’s delighted, saving 300 euros a month over his previous rate… Don’t have the heart to tell him what might be coming ahead

He’s your brother, shouldn’t you be telling him the truth?

Paul Krugman had a piece related to this today … ef=opinion

I’m hedged against higher interest rates - being in the euro gave us inappropriate monetary policy for the last decade. This might continue, just the other way around.

Hard to see where the inflaiton is going to come from with high unemployment everywhere but hey, who knows…

Stagflation - government primes the economy with printed money and also raises taxes to fund the deficit spending, net result is high inflation, those who get the money first put that money in commodities driving up the cost of raw materials, so business can’t operate or invest in production as they cannot control costs, workers rightly demand higher wages to compensate for loss of buying power, the unions and certain business interests demand trade barriers to counter ‘globalisation’ or being undercut by cheaper foreign competitors…

I do think I am lucky.
I’m on an ECB tracker + 0.6% with AIB
With my mortgage rate at 1.6% I am able to save thousands this year.
The cash saved is going into deposit accounts and earning 3.something % nett of DIRT.

I don’t see any interest rate rises for at least 6 months and limited rises thereafter - however I am hedging my bets -
in the event that interest rates do eventually increase to say > 3% I will lump the deposits off my mortgage.
(Having first contacted my bank to get a discount for early clearing of a non profitable tracker mortgage)

Are those sweeteners not likely to disappear pretty quickly once the ECB provide a clear signal (as they always do) that rates are on the way up?

Probably not, the margin (0.6%) is just too low to be economical for the banks.

Not suggesting that the Banks won’t want to get rid of the remaining trackers, but once the rate is trending upwards, they won’t need sweeteners to shift them, they can scare the bulk of remaining tracker holders onto more suitable rates without having to give much.