So whats going on with the banks then? First they get a 32bn lifeline from the government and now they are being loaned billions more! In short they are becoming more responsible. They are keeping the money in reserve just in case. They are scared to make loans, as they know what happened last time they lent recklessly.
House prices will not rise for quite a while, as they were too high to begin with, and the banks will not quickly repeat their mistakes. No more high lending for house prices. I've always said that the average house price will drop to around £200k. Some people think they will drop to 4x earnings, but this is ridiculous as the average wage in UK is around £25k, which would make average house price £100k. If that happens, I won't buy a house, I'll buy 2! Successful investors with lots of capital will snap all the houses up at that level! Commonsense says house prices will always be very high, just not as high as they have been in the last 5 years.
At the moment, bank interest rates for savers are a joke, with many accounts paying 1% to 2%. Bank share prices are plunging and it is hard to decide on successful investment opportunities. I'm keeping my eye on the banks. The share prices might just drop to levels too good to refuse, and then I may make an investment.
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