Friday, Oct 19, 2007
Easy come, easy go
Sky News: Britain In Debt As Mortgages Paid By Credit Cards
There is new evidence of Britain's mounting debt crisis, with more than a million households resorting to using credit cards to pay their mortgages. Experts are warning of an ever-spiralling maze of debt.
Posted by doomwatch @ 10:30 AM (837 views) Add Comment
13 Comments
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1. Loneranger said...
'1 million people now use their credit card for mortgage payments or rent'. This is scary stuff, is it really that bad out there? Then again I have been pondering over the last 18 months how people can afford to service such high levels of mortgage advances considering the average price of a property. This is going to play out in full during quarter one next year, bankruptcies will hit the roof once the 2 year fixed rates come to an end and people need to refinance, that's if they can secure a new deal! And to think there are still commentators arguing that the crash will never happen due to property shortage, a healthy economy, immigration and low levels of unemployment! Well you numb brains, open your eyes and look at the real deal instead of quoting us bogus opinion based on nothing but own self interest and concern for you won personal debt leverage. People have been living the lie too long..... WAKE UP!!!!
2. japanese uncle said...
with more than a million households resorting to using credit cards to pay their mortgages
--------------------
This directly implies more than million reposessions in the very near future. Economic Chelnovyl is becoming a reality, indeed.
3. Love Mises To Pieces said...
The 97% of our money supply (means of exchange) which is not physical notes and coins has all been borrowed into existence from commercial, profit-making banks. It is absurd that UK society has to pay enormous and ever increasing amounts of interest to private companies in order to have a universal means of exchange. We need complete reform of our monetary system. It should be HM Government that has the sole power to issue money. Banks would then be intermediaries between depositors and borrowers of pre-existent money and would have no power to inflate and deflate our money supply.
UK society currently owes about £800,000,000,000 more than the total amount of money in circulation. It is theoretically, let alone practically, impossible for us all to ever get out of debt. Ask yourself why this should be so. Watch this Google video to start finding out the answer.
http://video.google.co.uk/videoplay?docid=-9050474362583451279&q=money+as+debt&total=1460&start=0&num=10&so=0&type=search&plindex=0
4. Yorkshireman said...
This is truly shocking. It is bad enough to borrow on say a loan or overdraft to pay essential bills, but vey often, I am sure, the mortgage provider has no way of knowing the origin of the money. If I am correct and you can breeze into the building society or bank or pay over the web with your flexible friend, then we have sunk to a new low. I fear for the consequences in our society.
5. stillthinking said...
The fact that more money is borrowed than exists does not mean that the borrowed money cannot be paid back. This is wrong. Money can be repeatedly used. All of the created money cannot be withdrawn from the banks simultaneously though. The debt can be repayed by working. The interest on the loan can be repaid by working.
6. Yorkshireman said...
Stillthinking. I agree that most debts can be repaid by working, but irresponsible borrowing, which is what this is, pr
7. Yoss said...
Not as daft as it sounds.
Surely If you have a Credit card 0% deal for 12 months and paid 1% arrangement fee. Then taking 15K off you morgage balance would be quite an efficient way to pay your mortgage.
I actually thought about doing this to lower interest payments, and having an offset mortgage could quite easily switch the 15k back to the credit card just before the deal expires to clear the balance. thus saving the diffrence between the 6.85 mortgage rate and 1% arrangement fee on 15K
A saving of £877.50 (Tax Free)
8. Landedgentry said...
I hope they all go bankrupt, Serves em right. They should have thought about all this before going on luxury holidays and leasing BMW's, keeping up with the Jones's etc.
9. Oldfashionedbanker said...
Yeah I've watched the 'money as debt' vids with interest, it is indeed quite shocking to a great many people to realise that commercial entities (banks) can conjour money in existance with no real asset to back it up other than the borrowers signatures saying that he/she will pay it back. This is what people are talking about when people talk about M3 / M4 money supply. I.e. money backed by comercial paper. This is a huge market and parts of this are what have seized up in the recent credit crunch. Basically someone invented a way of turning mortgage debt into securities (e.g. things that people can invest in) I don't believe there is anything fundamentaly wrong with the process but rating agencies got the risk wrong, and badly wrong, along with a general appetite for risk in the growing world economy.
One thing these videos FAIL to mention is how Corporations and companies fit into this picture. These are the entities that create 'Money as VALUE'
Company is created - e.g. 1000 shares @ £10 = £10000
Peoples *efforts* grow the company, it now has a client base, and employees with expertise, so its VALUE has increased.
The company is now worth £5 per share e.g. £50000. E.g. the efforts of people, have created wealth.
This is the main wealth generation engine of the economy, that counteracts debt. If everything we purchased was on borrowed money, it would all be by definition worthless.
10. Love Mises To Pieces said...
It is mathematically impossible for society-as-a-whole ever to pay off all debt . Old debt plus interest is repaid by borrowing new debt, ad infinitum. The video explains why and how. No matter how much we (collectively) work, and how much real wealth is created, the difference between total money in circulation and total outstanding debt must increase inexorably, notwithstanding debt write-offs.
11. Wilee said...
I was just wondering what the rules were about using credit cards to pay mortgages in light of the fact that if you went bankrupt or get an IVA then sometimes you get to keep your home (don't you?). Surely CC companies wouldn't support a free line of credit knowing there's no way to recover costs against the asset it's being used to pay for, in case of default. Wouldn't the CC companies restrict use of cards in this way?
12. In The Delhi said...
Yoss,
Your comments are perfectly valid and it is an excellent case where you can beat the banks at their own game. I have been doing this with my offset mortgage for the past 2 years. By the end of this year my entire outstanding mortgage balance will be on a 0% card.
And Loneranger.. WAKE UP!!! I like it!
Prosperity is an illusion for many, the wealth effect making everyone spend, spend, spend. This will go into reverse and the wealth effect will become a poverty effect. Unfortunately for some this will mean real poverty, repossession and social stigma. It is happening already but won't be mainstream news until Q2 - Q3 2008 in my opinion. Position yourself accordingly.
13. Duncan said...
Love Mises To Pieces said...
It is mathematically impossible for society-as-a-whole ever to pay off all debt .
IMO there is a "Get out of jail" card for the whole situation which I haven't heard mentioned. Inflation.
Not house price inflation but inflation in other areas such as wages. Back in the late 60s my parents
paid £5000 for their house. My Mum says she was worried about the huge mortgage they were taking out.
However, after a few years of 15% PA inflation it soon came down and when they had double glazing fitted
it cost more than the house !
I'm not sure when the obsession with keeping inflation down started although its probably when the BOE
was given the job of keeping inflation (excluding house prices of course) down. Before then it wasn't unusual
to have wage and price inflation much higher wiping out peoples depts.