Cut Help to Buy to burst housing bubble, OECD urges Bank of England

Courtesy of Ben Chu @ The Independent:

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The Bank of England has been urged by the OECD to dampen the booming UK property market by watering down the Government’s mortgage subsidies.

In its latest report, the multilateral organisation noted yesterday that British house prices look overvalued relative to average earnings and rents and said the time has come for the regulator to take corrective action.

“Monetary policy tightening should be accompanied by timely prudential measures to address the risks of excessive house price inflation,” it said.

The OECD added that this action might include “tighter access” to the Help to Buy scheme, which offers state guarantees for mortgages worth up to £600,000, alongside higher capital requirements for lenders and maximum loan-to-value ratios for mortgages.

Many have called for the £600,000 cap on Help to Buy mortgage eligibility to be significantly reduced.

Last week, the Bank’s deputy Governor, Sir Jon Cunliffe, said house prices, which are rising at an annual rate of more than 10 per cent, are “the brightest light” on the regulator’s dashboard and said the Bank was “ready to act” if necessary to head off the danger of another damaging property bubble.

Stricter rules on mortgage lending were introduced last month and the Bank’s Financial Policy Committee could take further action to curb the availability of credit at its meeting next month. George Osborne and other ministers have sought to play down suggestions of a housing bubble and also the impact of the Help to Buy scheme on prices. Continue reading

The Shale Oil Party Won’t be an All-Nighter, Phibro’s Andy Hall Warns

What I find most frustrating is economic obfuscation and how statistics are manipulated to sell a paradigm. In a nutshell, lying leads to a misallocation of resources and therefore handicaps us in the future. The sustainable output of fracking is debatable, decline rates on wells are not publicised, it is highly subsidised through tax breaks and the environmental effects are unknown and more than likely, lethal. Courtesy of Andy Hall at Astenback Capital Management:

Oil Supply

The speed with which an interim agreement was reached with Iran was unexpected. Equally unexpected was the immediate relaxation of sanctions relating to access to banking and insurance coverage. This will potentially result in an increase in Iranian exports of perhaps 400,000 bpd. Beyond that it is hard to predict what might happen. The next set of negotiations will certainly be much more difficult. The fundamental differences of view that were papered over in the recent talks need to be fully resolved and that will be extremely difficult to do. Also, Iran’s physical capacity to export much more additional oil is in doubt because its aging oil fields have been starved of investment.

As to Libya, it seems unlikely that things will get better there anytime soon. The unrest and political discontent seems to be worsening. Whilst some oil exports are likely to resume – particularly from the western part of the country (Tripolitania), overall levels of oil exports from Libya in 2014 will be well below those of 2013. Continue reading

UK Housing Bubble…What Bubble?

The UK housing market is in a bubble. The OECD advised that UK home values have climbed 36.6% since 2004. The Bank of England said last week that mortgage approvals have surpassed 60,000 a month, 6 months earlier than predicted. I’m sure this will all turn out lurvely with lots of fluffy kittens included but a speculative real estate bubble validated as the key driver of nominal economic growth….what could possibly go wrong? Obviously this time, it will be different.

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