A recent report issued to the Bank of England has revealed that the actions of George Osborne may be about to trigger a financial crisis greater than 2007, and once again, it will start in the housing market.
The Chancellor has been aware for some time, that there has been a bubble in the buy-to-let housing market, where people buy properties in order to rent them out. The problem with this market growing too fast, or too big, is that if interest rates on the mortgages go up, it can trigger a mass sell-off. This floods the market with houses, resulting in a sudden crash in prices. This generally triggers a domino effect, as lenders stop lending (slowing the market further), and then the negative equity trap happens where homeowners who may have remortgaged their properties based on the higher market value, or took on a higher mortgage planning to sell on at the higher market value, suddenly find themselves in serious financial distress.
A new report from the National Landlord’s Association states that this moment may arrived. As Business Insider reports:
It looks like (Bank of England Governor Mark) Carney’s worst fear about buy-to-let could come to pass even without an interest rates rise. The Times reports on Wednesday that 500,000 buy-to-let properties could be sold off in the next year alone, followed by 100,000 a year until 2021.
While it’s notoriously difficult to rely on forecasts of what willhappen in the future, the figures come from a survey by the National Landlords Association and so are worth noting. The proportion of its members signalling intentions to sell with the next year has jumped from 7% in July to 19%.
The CEO of the National Landlord Association laid the problem at the feet of the Chancellor himself:
“Two speeches from the chancellor in 2015 have led to a crisis in confidence greater than when all but a few buy-to-let products were immediately withdrawn from the market following the 2007 financial crash.”
Read on...Support us and go ad-free
This worrying report comes less than a month after one of the City of London’s leading bear strategists warned of impending crash in 2016. Albert Edwards told an investment conference in London:
“Developments in the global economy will push the US back into recession,”
“The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed.”
“Can it get worse? Of course it can.”
Edwards pinned the expected crash of 2016 firmly on the same banks which caused the Financial Crisis in 2007/8, and the policy makers (like George Osborne and Mark Carney) who failed to reign them in afterwards.
“They didn’t understand the system then and they don’t understand how they are screwing up again. Deflation is upon us and the central banks can’t see it.”
Edwards was backed up by RBS, who issued a ‘sell everything’ warning in the same month – which means exactly what it says: sell everything, the market is about to crash.
Now, forecasts are forecasts. They are not inevitable, or absolute. What’s concerning is the absence of corrective action in the face of these dire warnings.
Whether it is the astronomical spike in house prices, the sudden crisis-in-confidence in the buy-to-let market, the crisis in China, the crash in prices of Brent Crude oil, or the litany of other red flags – the major indicators of an impending crash are present today. What’s worse, is the Conservative government are woefully under-prepared to deal with such a crash if and when it happens.
This could be the cause of the sudden rumours of a snap election in 2016. David Cameron has spent the last five-and-a-half years making an unholy mess of the nation’s finances. But he won’t be sticking around for the clean up.
Featured Image via Flickr Creative Commons
We need your help to keep speaking the truth
Every story that you have come to us with; each injustice you have asked us to investigate; every campaign we have fought; each of your unheard voices we amplified; we do this for you. We are making a difference on your behalf.
Our fight is your fight. You’ve supported our collective struggle every time you gave us a like; and every time you shared our work across social media. Now we need you to support us with a monthly donation.
We have published nearly 2,000 articles and over 50 films in 2021. And we want to do this and more in 2022 but we don’t have enough money to go on at this pace. So, if you value our work and want us to continue then please join us and be part of The Canary family.
In return, you get:
* Advert free reading experience
* Quarterly group video call with the Editor-in-Chief
* Behind the scenes monthly e-newsletter
* 20% discount in our shop
Almost all of our spending goes to the people who make The Canary’s content. So your contribution directly supports our writers and enables us to continue to do what we do: speaking truth, powered by you. We have weathered many attempts to shut us down and silence our vital opposition to an increasingly fascist government and right-wing mainstream media.
With your help we can continue:
* Holding political and state power to account
* Advocating for the people the system marginalises
* Being a media outlet that upholds the highest standards
* Campaigning on the issues others won’t
* Putting your lives central to everything we do
We are a drop of truth in an ocean of deceit. But we can’t do this without your support. So please, can you help us continue the fight?