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Archive for April, 2007

Catalyst For a Crash?

Wednesday, April 25th, 2007

WalletInflation has hit 3.1% forcing the bank’s governor, Mervyn King to write a letter to the chancellor explaining why inflation has broken through the 3% level. I suppose the next question is – how high will interest rates go? With the rise in inflation it is likely that interest rates will increase further in order to discourage consumer spending and to decrease the rate of inflation. The base rate is currently set at 5.25% but it is forecasted to rise to 5.5% on 10th May when the Bank of England’s monetary policy committee is due to meet.

However, if interest rates increase by more than this there will be some unfortunate consequences; those who have taken out interest-only mortgages will be hit hard as their repayments will seem more and more unmanageable. The many buyers who opted for a fixed-rate loan may not notice a difference however if they have a short-term contract they could also face steep rises in interest repayments.

Investment bank ABN Amro predict that the base rate will in fact rise to 6% by the Autumn, they are also preparing for a possible house price crash, however many other large banks disagree.

As these minor changes occur in the economy, I also wonder if it’s all heading towards a crash. Although I know this will dampen economic growth, it may also mean I can finally buy a house :).

Further information at The Guardian.

Will the Legal Drinking Age Rise to 21?

Monday, April 16th, 2007

Young Person DrinkingAccording to an article on the BBC News Website there is talk of raising the legal drinking age from 18 to 21. Statistics show that alcohol-related illnesses have doubled in the last ten years to 262,844 cases per year and that people suffering injuries due to too much alcohol consumption has again doubled to 148,477 a year. There has also been a 20% rise in hospital admissions from underage drinkers misusing alcohol.

It is obvious that the UK has a problem with alcohol misuse and that children and teenagers are drinking too much too often, but even if the legal age is changed, will this really stop them from drinking? I don’t think so… the main problem my friends and I faced as teenagers was a serious lack of anything to do in the area. We drank because we were board and I expect the situation is still the same now. Unless the government plan on creating somewhere for teenagers to go in the evening the problem will persist.

I’m not saying this is the only issue related to underage drinking; home life, location, choice of friends and many other factors will lead children and teenagers to drink. I doubt the main problem is with young adults between the age of 18 and 21, so I can’t really see how raising the legal drinking age will stop school children from drinking.

House Prices

Friday, April 13th, 2007

Over the past 10 years since Labour came into power house prices have risen over 200% across the UK. This is great news for home owners, and particularly the older generation who have purchased a house before or during the earlier years of this period. It’s not so great for the ones who have only just gotten on to the property ladder, and for young people who are looking to buy their first home now, the situation is dire. House price to income ratios are now astronomical at something like 10 times earnings.

Yet people seem to have been brainwashed in to thinking that rising house prices are always a good thing. If the price of any other essential commodity was rising this fast there would be outrage (imagine food rising at 20% a year), so why is it acceptable for the equally essential roof over our head? Well, quite simply, it’s because people treat housing as an asset, and in a lot of cases it’s their one and only asset. Pension funds and stocks have been going through a rough few years and only recently have they recovered to their pre-2001 levels, so rightly or wrongly people have been ploughing money into housing at an unprecedented rate. A lot of people will depend on equity in their house to pay for their retirement.

During this time Labour has been more than happy to sit back and let it happen, as rising house prices have meant that people feel richer and therefore spend more thus keeping away a recession, and allowing the chancellor to claim the longest period of economic growth for more than 100 years.

However, even if you are an existing home owner, unless your next move will be trading down to a smaller property, or selling up all together, you won’t truly gain from any house price rises. In fact, if you have ambitions to live in a bigger property, then rising prices are only making your next house even more expensive, meaning you will have to borrow even more to get that dream home.

So why are people convinced that prices will never fall (even though they have for several periods in the last 40 years)? Well, the mainstream media are the main culprits. If you look through most newspapers you will find they are pasted in adverts from property companies; property seminars, estate agents, mortgage companies etc.. All these advertisers have a vested interest in talking up the property market. If house prices were to nose dive, the newspapers know that at best these companies will cut back their advertising budgets, and at worst a lot of them will go bust all together, which would damage their profits.

So it’s in the newspapers interest to keep home buyers confident in the stability of the market, and this is reflected in their articles. In fact, even The Times of all papers was recently criticised in the way it manipulated an interview with BBC Economics Editor, Evan Davis to imply that he thought houses were a safe bet. It turns out he actually thinks they will probably fall, and has set out why a house price crash could be beneficial in an article on BBC news.

So how do we solve the housing problem? It’s clear that restrictive planning is a major cause, so for a start we need a major overhaul of our planning system to make it easier to build new homes. On top of that, we should probably put stricter lending criteria on loans and mortgages.

The BBC recently aired a well-balanced news piece on the 10 O Clock News:

If you feel as passionate about this subject as me, then you should join the debate over at the House Price Crash forum. You should also vote for this issue on webcameron to see if we can get David Cameron to raise the issue in the house of commons.

Smoking Ban Commences in Wales

Monday, April 2nd, 2007

Smoking Ban in WalesPubs, restaurants, public transport and offices will now all be smoke free in Wales thanks to the new smoking ban introduced this morning. Anyone caught smoking in these areas could be fined £50 on the spot, there will also be consequences for people in charge of buildings if they continue to allow smoking.

Scotland has already put their smoking ban into place and Northern Ireland will implement theirs on 30th April 2007, England will then follow suit on 1st July. I personally cannot wait until the England ban comes into place; I tend to avoid pubs that I know are really smoky but will happily visit them again once the law comes into place.