Heading For A Housing Crash!

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ON MONDAY trading on the Wall Street stock market in New Century Financial shares was halted, as the second largest US sub-prime mortgage lender was suspended, staggering on the edge of bankruptcy. At least 22 other sub-prime lenders have already gone bust.

New Century Financial has said that its bankers are demanding that it speed up its buying back of outstanding mortgage loans at a cost of over $8 billion. This is cash which it does not have.

Already the HSBC bank has had to put billions of dollars to one side to cover its exposure in New Century Financial.

There is panic on the US stock market and fears that the meltdown of sub-prime mortgage lenders will spread into the main $8,000 billion mortgage market, leading to a collapse in house prices, undermining banks and putting an end to any expansion in the US economy.

The US stock market has just experienced a major fall of share prices, with even bourgeois economists predicting that it was just a tremor of the avalanche to come.

In Britain there are already record levels of domestic debt, some £1.4 trillion including mortgage debts, a record balance of trade deficit in goods for last year of some £80 billion, and a currency that has leapt in price to almost $2 to the pound.

Inflation is now rising rapidly in the UK.

The average price of a home in the UK inflated in January, according to figures from the Department for Communities and Local Government, by 10.9 per cent, after a leap in average house prices of 9.9 per cent in December.

This inflation has led to the average house price in the UK rocketing to £205,286.

Inflation has reached the point where the average property price increased by about £4,000 in the month of January alone.

In Northern Ireland, annual house price inflation is currently running at a startling 42.5 per cent, as it catches up with the rest of the UK.

Scotland and Wales saw the annual pace of house price inflation rise to 15.9 per cent, and 10.2 per cent in Wales.

Yesterday bourgeois economists were saying that this level of house price inflation would require rates rising to eight per cent, and that the inflationary surge would end in a much worse housing crash than was experienced in the mid 1990s.

The Bank of England interest rate is currently 5.25 per cent.

Now super inflation of house prices has been joined by a leap in commodity prices as they leave the factory gate.

The news that UK factory gate prices rose by 0.5 per cent in February, prompted immediate fears that the Bank of England will have to raise interest rates to counter this inflation.

The Office for National Statistics said higher raw material costs had hit manufacturers hard.

Economists believe that the Bank of England’s Monetary Policy Committee is particularly concerned about the prospect of manufacturers raising prices.

The prospects are that rising inflation in both house and factory commodity prices will lead to a run on sterling and much higher interest rates, that will touch off a major increase in mortgage interest rates, a huge rise in house repossessions and a housing crash.

The answer of the government will be even higher interest rates, and a crisis programme that will involve a wage freeze, wage cuts in the public sector and benefit cuts.

British capitalism is a pack of the flimsiest cards just waiting to be collapsed by the deepening crisis of US capital and the world-wide and continuing increases in basic commodity prices.

The trade unions must be made to defend the jobs, wages, benefits and the housing of their millions of members and the millions of workers and middle class people who are about to be hit savagely by the developing crisis.

The trade unions must oppose any bourgeois programme to make the working class and the middle class pay for the capitalist crisis by putting forward a programme to defend the jobs, wages, benefits and homes of the working class by expropriating the bourgeoisie and getting rid of crisis-ridden capitalism.

It must demand the nationalisation of the banks to prevent the repossession of thousands of homes that will be hit by increases in mortgage interest rates.

It must oppose all wage cuts and benefit cuts and organise the occupation of all factories where bosses seek to sack workers, demanding that they be nationalised and put under workers’ control.

Above all they must bring down the capitalist government of the day and bring in a workers’ government that will carry out socialist policies to replace bankrupt capitalism with socialism.