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Bank Of England Warns Of Dangers Of Rising House Prices - “Temporary Self-Fulfilling Prophecy”

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DAILY PRICE REPORT

Today’s AM fix was USD 1355.75, EUR 977.47 and GBP 817.01 per ounce.
Yesterday’s AM fix was USD 1,348.00, EUR 973.57 and GBP 810.44 per ounce.

Gold rose $7.10 or 0.5% yesterday to $1,347/oz. Silver closed unchanged on the day at $20.81/oz.

UK Bank Base Rate (1694-2014) - BOE, Church House

Gold is higher in all currencies again today and has surged to the highest level in almost six months, as increasing geopolitical tension leads to safe haven demand. Concerns about the Chinese and indeed the global economy is also supporting gold. Gold has been particularly strong in sterling in recent days and is nearly 3% higher in sterling this week.

Russia, the world’s largest energy exporter, having taken control of Crimea is contributing to the worst crisis between Russia and the West since the Cold War. Overnight, Ukraine’s deposed Russian backed president warned of a possible civil war. The U.S. and EU have said that Russia must switch course in Crimea by next week or risk more sanctions.

Gold in British Pounds - 5 Years (Bloomberg)

Bank Of England Warns Of Dangers Of Rising House Prices - “Temporary Self-Fulfilling Prophecy”

The speed UK property prices are surging at is “approaching madness”, analysts have warned, after UK data showed house prices jumped 2.4% in February alone, the biggest monthly increase in five years.

According to the Halifax House Price Index, prices also surged 7.9% year on year to an average of £179,872. This marks the strongest price gains since October 2007, prior to the global financial crisis.

Speaking to the Telegraph, Oliver Atkinson, director at urbansalesandlettings.co.uk, said in parts of Britain “the momentum is approaching madness, as price rises continue to accelerate”.

The rise, revealed in the latest Halifax House Price Index, outstripped analysts’ expectations of a 0.7% rise, renewing fears of a house price bubble.

Interest rates will rise six fold by 2017, the Bank of England Governor Mark Carney said yesterday.

The increase to more “normal” levels is likely to plunge many borrowers into financial difficulty and put pressure on over extended mortgage borrowers and on the property market.

Carney said that Bank rate could reach 3% within three years, six times the current 0.5% rate.

Carney admitted that there were concerns that spiralling property prices could encourage people in other parts of London and Britain to take out mortgages that they would be unable to afford once interest rates start rising from their historic low of 0.5%.

“Our concern would also be that a rising housing market, occasioned in part because of the dynamics in prime central london, would encourage individuals to take greater risk without fully incorporating entire interest rate cycles that would transpire over the life of a mortgage,” he added.

He warned of the dangers of a “temporary self-fulfilling prophecy” of house prices just continuing to rise which could lead to many households taking on too much debt and leaving them in “vulnerable” positions for many years.

GoldCore believe that ultimately, London property prices are unsustainable and may be subject to a violent correction.

Given that interest rates are at historical lows, London property prices are vulnerable to any upward movement in interest rates. A material slowdown in the UK or in the global economy or even another global financial crisis would curtail international cash buyers leading to falls in London property prices.

Our most recent report looked at the London property market.
Download your copy here: Is London’s Property Bubble Set To Burst?

 

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Wed, 03/12/2014 - 17:38 | 4540485 tocointhephrase
tocointhephrase's picture

Is the property market about to burst

Does the Pope have a balcony?

 

Wed, 03/12/2014 - 17:05 | 4540368 moneybots
moneybots's picture

"Bank Of England Warns Of Dangers Of Rising House Prices"

 

When they warn of the dangers of rising home prices, it is too late to warn about the dangers of rising home prices.

 


Wed, 03/12/2014 - 15:05 | 4539858 skbull44
skbull44's picture

It appears Mr Carney, in having sent his home and native land 's housing market into the stratosphere (Canada), is now intent on repeating the feat in the UK. A globalists's wet dream come true...

Wed, 03/12/2014 - 14:52 | 4539783 Joebloinvestor
Joebloinvestor's picture

B of E should warn about its' own malfeasance and ineptness.

Start prosecuting some of the fossils that run it and that will restore some confidence.

Wed, 03/12/2014 - 14:50 | 4539778 Sick
Sick's picture

What needs to happen is the renters should just trash the places where the rich, REIT, and others have invested.  Now that I think about it that already happens.

Wed, 03/12/2014 - 13:43 | 4539466 Never One Roach
Never One Roach's picture

"No one saw this coming...."

Prob is, bankers, realtors, etc get their money up front right now...the losses later on are passed on to innocnet others. The real culprits never pay a cent, they only rape the system and run.

Wed, 03/12/2014 - 17:46 | 4540506 PT
PT's picture

Banks lend money to idiots.  The idiots bid up prices to nonsensical levels.  The foreclosed homes are probably sitting in the idiots' pension funds ...

People who can do maths go homeless. 

Wed, 03/12/2014 - 13:31 | 4539429 KingdomKum
KingdomKum's picture

we few,  we happy few,  we band of silver holders  .  .  .

Wed, 03/12/2014 - 13:30 | 4539424 Racer
Racer's picture

And the imbeciles didn't fuel it (again) by lowering interest rates too low and also by allowing first time buyers to put a noose around their necks with low deposits, via that moronic guarantee the gobmint gave?

House prices were already too high on a price to people's earnings ratio, years ago two people didn't have to work full time to pay the mortgage and earnings are not keeping up with inflation (the reported as well as the real stealth tax rate of inflation)

Wed, 03/12/2014 - 17:47 | 4540510 Manthong
Manthong's picture

It's my impression that a lot of those loans are ARM's.

Greater London will look a lot like the Western Front when this thing pops.

Wed, 03/12/2014 - 17:42 | 4540498 PT
PT's picture

Or ... they could, like ... only lend to people an amount that somehow correlates to what people earn, like ... you know, if they can't afford the repayments then don't lend it to them ... Is that really too hard a fucking concept for a bank to understand???  Yeah, they only deal in money.  Who needs maths when you've got sales skills?

Wed, 03/12/2014 - 13:44 | 4539473 max2205
max2205's picture

Curious. ...whats the equivalent property tax on a 500 and 1.000 house per year

Thats gonna be the crusher 4 years out

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