The council of Mortgage Lenders have admitted that it is ‘futile’ to attempt to estimate house price movements in the near future. No one should be too surprised at that. Over the last couple of years we have seen all sorts of expectations and predictions about house prices. How many have proved right?

A couple of years ago we had ‘experts’ predicting that house prices would continue to rise substantialy, then they we saying property was always a good investment, then they said that there might be a slight pause in the rise of property values and now they prefer to say nothing because nobody really knows what will happen next.

The financial industry is going through turmoil at the moment. What the manby people realised a long time ago, the financial experts are now recognising. The financial golden goose has been cooked and is no longer laying the golden eggs.

How did we get here? Everyone wants to know who to blame. The truth is probably far too complicated to ever be found but you can bet your last penny that greed was the largest contributing factor. Everybody wanted to get rich from the bankers through to the consumers who were eager to profit from homes as an investment.

It was obvious that it was unsustainable. House prices could not just keep going up forever to unaffordable levels. Even the government got in on the act with various attempts to help people afford houses but all these support measures achieve is to help keep raising house prices.

The value of a house is what people are willing and able to pay. While the finance industry did everything it could to profit from the boom they made mortgages available that we simply unrealistic. Some people borrowed far more than they could realistically afford believing, correctly for a while, that house price rises would cover the fact that they were financially stretched. It could not continue like this forever and the crunch was always going to happen.

The homebuyers had been effectively mugged, just as share buyers were mugged back in the dotcom boom back in 2000. With all the hype and the estimates the ‘professionals’ were putting out it is no wonder the average person in the street felt they would be missing out if they didn’t get involved.

Bubbles always work for a while and prove the predictions. Pyramid schemes usually work for a while and for the first few people to join they can be very lucrative, they prove the predictions but pyramid schemes are considered illegal because they usually sell the opportunity to sell rather than a real product. In my opinion the people in the housing and financial market were not so far away from this. They were selling dreams and sadly, for so many ordinary people, those dreams have turned into nightmares.

How many people are stressed beyond measure by the financial hole they find themselves in. Not because they were stupid but because they were told by everyone that huge houseprice rises were here to stay.

The fallout of this will last many years for a lot of those people who will find they cannot sell their property for what they paid for it. Yes, of course we can expect property prices to rise again in the future but it may take several years just to get back to where we were a couple of years ago.

It reminds me of one of the basic rules of investing. When everyone but everyone is talking about investing in something, that is the time to get out of it. The reason is that everybody cannot be rich and when everybody is buying into an idea or an investment it is forming a bubble that will burst when the next layer of new buyers are not able or willing to pay for the profits of those who went before them.

It has happened many times before and will, no doubt, happen again.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Well the banks are still struggling to find enough cash to keep the financial industry wheels moving. You can tell that times are hard because while ordinary people are struggling to pay the electicity bills, gas bills, and mortgage repayments, the bankers are still sitting in their plush offices in some of the highest priced office space in the country. No doubt they shed a tear for us all as they sup fine wines over an expensive lunch.

They brought it all on themselves. The credit crunch wasn’t caused by the customers. We have all been doing our best to keep them in business and we have all racked up huge debts and enabled the banks to make vast profits on our debts. We have definitely been doing our bit to help them, intentionally or otherwise.

I was looking at a credit card statement just the other day. The interest rate is listed at about 20% APR.

The Bank Of England rate setting committe agreed to maintain the bank rate at just 5% so why are interest rates on credit cards so high? I have often wondered about this in the past. I don’t remember exactly what the interst rate on credit cards was when the bank rate was around 10% or so but I have a sneaky feeling it was about 28%

If that is right then the current rate should be about 14% APR and that would sound about right to me. 20% APR with a bank rate a quarter of that is simply excessive. They rip us off because they can but times are changing and people are becoming far more aware of how the banks have treated us as a stupid cash cow for so many years.

The banks are famously unhelpful when you need help badly. Maybe the banks will find that the great british public will be less than helpful when they are crying out for customers to keep the fine wines flowing with their dinners and th rents paid on their luxury offices.

So, should we feel sorry for the bankers? Yes, of course. We should care as much for them as they care for us. i.e. not one tiny little bit

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)