Friday, Jun 19, 2009
Who cares about the economy? It's the reckless borrowers who have to be looked after!
Metro: Homeowners 'benefit from rate cuts'
Homeowners are 25% better off this year than they were in 2008 due to record low interest rates slashing mortgage costs, according to new research. The average homeowner with a mortgage now has £1,075 a month left to spend after meeting all of their fixed monthly outgoings - up from £859 in 2008. The increase has been driven by an 8% fall in household costs during the past 12 months as reductions to the Bank of England base rate cut monthly mortgage repayments for people on a variable deal, according to Ernst & Young.
Posted by mark wadsworth @ 07:49 AM (1149 views) Add Comment
14 Comments
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1. techieman said...
"He said this had led to many consumers using their increased disposable income to pay off debt or increase savings, rather than spending the money.
Mr Gordon added: "In recent weeks, there have been some tentative signs of stability in the economy and the housing market. Consumer confidence has also picked up from its all time low. However, it remains to be seen whether these indicators translate into a sustainable recovery. Until they do, it's unlikely that consumers will rediscover their appetite for retail therapy.""
yes when sentiment turns people think twice about spending the money they have now got as a windfall as they are concerned that the rainy day might not be so far away and may be a torrential down pour. If consumers draw down debt or increase savings then what does that tell us? I would like to see some hard evidence of this in the numbers....
2. charlie brooker said...
We on HPC always knew the point of the slashing interest rates was to put money in people's pockets. Why has it taken the meeja so long to catch up?
Answer : They understood too but are now using what was common knowledge as propoganda.
3. paul said...
Of course they forget to mention that half of the working population are now on reduced wages (i.e. the private sector) and that's if they've managed to keep their jobs!
Unemployment among under 25s is now pushing 20%.
Paying down that debt is good money after bad - the Bank of England should understand this by now becaue that money will not be recovered in the value of the asset for a long, long time. What a waste.
4. paul said...
But hang on ...
Borrowers fail to use low rates to overpay
5. matt_the_hat said...
Just because spending has no increased does not mean people are saving, maybe they are just supporting their lifestyles with earned income instead of credit cards for groceries.
6. bellwether said...
They refer to a sum of £1075 after fixed monthly outgoings, I'd be interested to know if this includes food bills, transport, clothes. If not £1000 for a family is subsidence and actually not that much better for an individual
I still believe that as house prices fall it will be the loss of so called "equity withdrawl" that will serve as the coup de grace. This is a central reason why policy makers are so panicked about house prices not falling, well that and the fact that most own one.
7. techieman said...
Bw - subsidence or subsitence? Maybe thats a clever play on words - too early for me mate :-). Not to detract from your point.
8. stillthinking said...
GB successfully devalued the pound by about 20%. This is the real benefit for debt holders, and the interest rates were the mechanism to do this.
20% off !!! That cut in debt is real because I doubt that sterling is going back to its old level any time soon. Stupid savers.
9. bellwether said...
techie if only i could claim i was trying to be clever, genuinely thought that was how to spell subsitence. I stand corrected (and to quote from partridge) said the man in the orthopedic shoes
10. bellwether said...
ST but the interest rate cuts won't stop prices falling and falling until they are a sensible representation of incomes ie the debtors are helped a little but its only temporary and certainly no cure.
11. p. doff said...
or 'subsistence' even.
The Gummint has stolen the interest on my savings and given it to the reckless, in an attempt to cover up the extent of Gordon's mismanagement of the economy. Stupid savers indeed.
12. 51ck-6-51x said...
I am a stupid saver - I knew I should have put at least some of my GBP into a basket of CHF, JPY, USD, EUR in 2007 (think I even mentioned it on this blog late '07 or early '08, but can't seem to find it through Google, so maybe I didn't!)... but I didn't have the balls to risk being totally wrong. Stupid lack of balls ;p
13. uncle tom said...
This is one of these silly studies that averages everything without realising that chalk and cheese don't mix.
Those mortgage paying households in the top 20% as far as income is concerned, have come off very nicely. Typically, they have moved from break-even domestic finances to a position where they can clear card debts, and pay down their mortgage a little. However, they are also seeing their perceived property wealth evaporate rapidly.
The next 20% are not getting anything like the benefit indicated in this study, and had often been heavily dependant on equity withdrawal to support their lifestyle. For most in this sector, that option has come to an end now. They are now having to reign back their spending heavily - no new cars, no new furniture, no new TV's, no expensive holidays.
That in turn of course is proving ruinous to car dealers, furniture dealers etc. - many of whom are in the second income quintile themselves..
14. Greenstar said...
i think government has been doing the right things since the recession started.you will see this within the 2-3 months when everything gets back the normal!