Pyramid Comment

This journal takes an alternative view on current affairs and other subjects. The approach is likely to be contentious and is arguably speculative. The content of any article is also a reminder of the status of those affairs at that date. All comments have been disabled. Any and all unsolicited or unauthorised links are absolutely disavowed.

Wednesday, March 28, 2007

Mortgage Yoke

Banking Master Plan

As time goes on and house prices continue to increase, the length of a mortgage will also increase. Currently, the mortgage term for 1 in 4 mortgages is 40 years and this, apparently, is not unusual. Debts still being paid at age 65 and beyond. This is going to be more common. Some mortgages are being offered over 52 years. What is the interest on £100,000 over 50 years? Or should that be £1000,000 over 500 years?

Confounded Interest

Banks and building societies are only providing a lending service and cannot possibly have an interest in seeing property prices escalate off the scale. Can they?

Repossession - Speed Ensures Best Return

This illusion is of everyone becoming wealthier, but this is, of course, a long way from the reality. The yoke around your neck just gets tighter and heavier.

I despair for my children who will face the situation eventually about buying property. But what is all the hype about getting onto the property ladder? The lenders want to get potential borrowers onto the property ladder and will devise all sorts of schemes to do just that. The question to ask is who is behind the building societies. Where does the money to lend come from? Lending up to 6 times a joint income. The 'joint' is no longer endorsed by marriage. Defaulting is likely to increase. Lenders won't worry about that as the deal has already been struck. The grip gets tighter and tighter and nobody seems to notice. To get on the property ladder is at any cost. Literally.

Is it better to wear a heavy and tight yoke than give your money to a landlord? Used to be. That's for sure. A new dilemma is raising its head: put yourself in a potentially desperate situation and reject your freedom by relinquishing all control of your own destiny or give your money over to a landlord who could be a work colleague.

There has always been a society of them and us and the gulf in between is widening and getting deeper. The so-called "upper classes" whose wealth has always been, allegedly, questionable (I've never noticed any logic to connect "upper classes" and wealth) now diverts attention to the middle classes. The dilemma gets more sinister as the redistribution of wealth moves to the "new wealthy". The illusion continues and spreads like a virus, never fear though, they won't hold it for long.

It will all go onto the sickeningly-rich rich: what do these people do with their money?

Buy control, of course. Or put it another way: Awareness Of Standards.

Paying off debts till the end of lifetime. Living in order to finance a mortgage. What a joke. Like smoking: buy cigarettes, pay taxes and die before you get ill. Perfect. Lending money is better and, ideally, should be together. Include drinking and there are the magic three: lending money, smoking cigarettes and drinking alcohol. More like an Unholy Trinity.

All encouraged and all tied together. A wicked trinity. An unholy alliance.

But don't stop there. Add a car and fuel (distance) tax and the picture gets even more grim. Do you see how the moderately wealthy will be made poorer and the rich even richer? The amount of money won't change, just who gets their hands on it. This redistribution of wealth. Monstrous debt and potential hardship and walking straight into it. The definition for having your 'eyes wide shut'.

We are, of course, heading for meltdown and that has nothing to do with the next solar maximum (coming in 2011/2012). We'll not survive that long, but the Earth will. Survived the virus walking the planet. How BIG is your ego? Way too small. Planet Earth doesn't have an ego as it doesn't need it. Just let life extinguish itself. Again?

Taking out a loan over such a long period is extremely dangerous, leaving people susceptible to all sorts of circumstantial change, like the next rise in the interest rate. How many in 2006/7? Four? To keep the rocketing cost of housing down by making money more expensive to borrow. That was always the plan. Trap you into your thinking that you need the debt to get on the property ladder then make it more expensive to do just that. Those already on it have to service their loan since it becomes more expensive. Saving money is also virtually impossible. This also means that little in the way of interest is paid out.

This is an almost foolproof method of sustaining wealth at the expense of those desiring to become wealthy. The property ladder is an illusion: the only time that any personal wealth is made is once the property has been paid for and possible downsizing when family size decreases. Conversion of property to actual 'money in the bank'. Interest will be non-existent on the non-existent mortgage, but interest on the yield of the final sale (savings) will be lower as time goes on. Banks collect the (high rates of) interest during the lifetime of the loan (mortgage) then pay back next to nothing when the loan has ended. It's perfect.

Money laundering
potential is enormous.

For the buyer still on the property ladder, buying the next (probably) more expensive property will always consume any potential profit. This is usually the reason for moving (though also any necessary relocation or an increasing size of family). Yet mostly to acquire the ladder to increased perceived wealth.

It's self sustaining: little interest out implies less cash into the coffers. But the interest paid into these same coffers by borrowers is the source of income.

The property ladder creates the illusion of self betterment. The reality is working for a lifetime to make money for someone else. You may (eventually) own your property, but at a huge cost paid to someone else. The interest you pay to the lender will easily surpass the capital originally borrowed.

Where do you imagine the banks get their money from? The banks are funded by the megawealthy families in the world. Think Rockefeller (and consider the bloodline). Even in death the government makes a fortune out of inheritance tax. That cash cow will continue relentlessly. In life, it involves stamp duty in property transfer. You might theoretically make potential wealth out of property, but the reality is everyone else in the system is making it too. And a lot more than you. A lot, lot more.

The nett growth is just about zero. No gain. No loss.

Government makes a fortune, but always claims it never has enough and so just takes more. Council tax is technically extortion: demanding money with menaces on pain of imprisonment. Is this spin taken to the extreme? And the bailiffs take possession of goods to the 'value of your debt' and all with government endorsement.

The debt that has been created because the government demanded more money.

How do you know where your tax money goes? Corporation tax on lending and the associated interest. Again this can be illusory. Tax breaks mean that corporation tax can be avoided, the taxpayer plugging the hole.

The minority can make money out of you buying your own property.

Except you. One of the majority.

The illusion gets more vague, yet becomes clearer. Paradoxical?

Just think who benefits, but exclude yourself.