The Current prognosis

Hi folks - there is an awful lot of commentary right across this site and across mainstream media outlets regarding the current situation in the sub-prime crisis in the States and what would appear to be the likelihood of it infecting the global economy, depending on who or what you read. I would be grateful if some of the more knowldegable contributors could give an overview, especially for the great financially unwashed amongst us (preferably in laymans language), of what exactly this may signal for those of us in little old Ireland, both on a macro and micro level.

For example, could the injection of cash by Trichet signal a pullback in plans to increase ECB interest rates? Does the fallout from the sub-prime mess signify that the average Joe or Josephine will be unable to borrow even moderate sums going forward? If so, is it possible to put a time-frame on for just how long these more stringent lending procedures will last - or indeed is this just the new reality which we should all be getting used to? Will what is transpiring in the financial markets have an effect on the average Irish (100% or not) mortgage? Im sure there are many more pertinent questions but these are just some of the ones which spring to mind at this moment in time.

Apologies for the simplistic nature of the questions ( :blush: ), but it can be difficult at times for those of us without a financial background to follow some of the terminology of the debates, and indeed to grasp the wider significance of the events as they unfold.

Thanks in advance

First of all remember that all this crap started post 2001 and

  1. the explosive growth of dodgy derivatives post .com crash
  2. filthy cheap post 911 interest rates.

In August 2001 the max mortgage was really 25 years , maybe 30 , and the max LTV was 4x main income + 1 x second and these were repayment not IO either.

yes, it signals thet the ECB is concerned and will not want to spook the spooked markets.

nope. It signals that the old lending multiples of 3 times main income and 1 x second income are returning , for a while. These are normal and not moderate amounts .

However they also indicate that 2 x average Joes on €35k per annum each will only be able to borrow around the €150k mark.

returning normality after a 5 year debt binge, thats all.

There will be a pullback to 90% and a reduction in the numbers who can get IO and 40 year product , especially 40 year IO which is insane.

It will snap back to a tendency to sell 25 year product and repayment not IO.

The big BIG variable in all this is whether any Irish securitisations get into trouble, or the institutions behind them or both.

If not then they can go back lending much as before. Only time will tell really but I would *personally *expect a c.1 year long snap back to quality at this point in time.

Ok thanks - so am I right in saying that the majority of people (ie people whose main involvement with financial institutions comes through the repayment of their mortgage/loans etc as opposed to people who are actively involved in the financial markets) will be affected by the fact that while the repayments on existing mortgages may possibly not be about to increase in the short term due to the possibility that the ECB will not rise rates further, it will prove a lot more difficult to draw down new mortgages over the coming years?

If this is the case, could this then serve to prolong the timeframe for the downturn in the property market as those with existing mortgages (including the specuvestors) are under a little less pressure to offload and can afford to wait that little bit longer with rates remaining at their current levels? Of course there is also less new entrants to the market in the form of FTBs as the banks are not loaning the same volume of cheap money as previously. So is it the case that we end up with the same scenario just drawn out a little longer? Does that make sense?

Stagnation? Maybe… but if markets really dive, if the shudders are global then it will mitigate any stay of execution for the puny Irish Property Market who now starting to resemble a walking dead junkie. I think it’s too volatile to know when you think globally. Perceptions have changed, the show is over the bling is tarnished. This is new new Ireland. Where 1 air line route pullout of a regional area sees an assemblage of business heavy hitters foam at the mouth looking for blood. It’s starting to get nasty. So much for the free market, it’s only as good as long as the cats have their cream. Where is the darling O’Leary the Fatima child of the commercial universe, savior of the free thinking world… or the Savvy N’Shrewd Ahearn, the wheel barrower extraordinaire. I predict tonight the Bank Of Bertie will Inject another 2000 tones of hot air into the economy at 6.66% interest.

Iraq, with the UK moving out its is going to up the pressure on the US.


Perhaps we need another WAR to keep things going.

Jaysus will Yis look at the size of his spanner

Gift :wink: