Tuesday, Sep 01, 2009
The Great Deleveraging/Debt Deflation continues ...
BBC: Decline in UK personal debt level
"The total amount of personal debt in the UK has fallen for the first time since records began in 1993, the Bank of England has said. Personal borrowing fell by £600m in July, taking the total owed by individuals down to £1.457 trillion. There was a drop in both mortgage debt and other forms of borrowing such as bank loans." but then again there's always the VI spin "The number of mortgages approved in July rose again to 50,123, suggesting property sales will continue to rise." promptly countered with this "Total net lending to individuals fell by £0.6bn in July, showing a net repayment for the first time in the series," the Bank said.
Posted by mark wadsworth @ 10:30 AM (1531 views) Add Comment
14 Comments
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1. phdinbubbles said...
600million/1.457trillion = 0.0412% reduction in personal debt. Is that a full tin of baked beans?
Can someone more enlightened in the way of economics (not difficult) tell me what this means? Does it mean that less people are taking on debt (mortgages and businesses) and more debt is being written off and those that took on too much debt are paying it down thanks to the low IRs? So the reckless fools who took on too much debt and the reckless fools that lent it are being bailed out by the sensible people that could be taking on new debt at sensible levels to fund house purchases and businesses. Anyway the BBC seems to think it's good news, along with house price rises, so it must be good.
2. phdinbubbles said...
Sorry, didn't read it very carefully, it's personal debt rather than business lending.
3. mark wadsworth said...
PhD, it is a teeny tiny contraction (and well within the margins of any measuring error) but you have to compare this with the trend from 1997 to 2007 when household borrowing (mainly mortgages) went up on average by £70 billion a year.
4. phdinbubbles said...
Cheers MW - was trying to make sense of it from the starting point of the BBC article. Have had a look at the BoE stats posted above and it's a bit clearer to me now!
5. titaniccaptain said...
Its not that businesses and home buyers are deciding to reduce their borrowing....no one will lend to them.....its just been given a nice dose of spin to make it fit the Brown Broadcasting Corporation daily mind control....
6. refusetobuy said...
This is the justification for QE. Money supply is contracting, so the BOE must counteract by filling the cavity with asbestos pounds. The don't want the heat of the economy escaping through the walls as deflation.
But there is no wholesale debt markets so someone has left the barn door wide open.
(Can't think how I can squeeze in more metaphors)
7. mrmickey said...
Even if the consumer stopped borrowing tomorrow the government would just take up the slack and spend the borrowings on a new war or something.
8. titaniccaptain said...
"The amount outstanding on mortgages fell by £400m as people repaid more than they borrowed during July.
The amount accumulated on what is called consumer credit, such as loans and hire purchase agreements, dropped by a net £200m, once a small rise in credit card borrowing of £92m was taken into account. "............there you have it no one can pay their mortgages they can't remortgage so they use the plastic as a buffer to see them through until "The Recovery"....
And also for all you girls blouses out there who were sniffling last week "Oh no house prices are rising....mummy help the crash is over"...call ya selves HPCers......
I will be screaming doom and gloom half way through the next inflated bubble even if it has another 50 years to pop...........get a grip you lot.
I'm off to water-stones to buy a copy of The Egyptian Book Of The Dead so I can read it to my children before bed time.
9. happy mondays said...
@ mrmickey, now your just being silly & cynical, the government wouldn't just start a war..next your be saying our troops are in Afghanistan for military positioning & not to keep the streets of London safe !
10. uncle tom said...
"its just been given a nice dose of spin to make it fit the Brown Broadcasting Corporation daily mind control"
Political parties never reveal their full agenda during a campaign, and pledging to take issue with the media is an absolute no-no; as the media can get their retaliation in first..
..but I get a distinct feeling that the Tories will be sore about the biased reportage they've had to suffer from the Beeb over the last twelve years - there's unfinished business there..
..I'll wager the licence fee will be abolished inside three years, and consumers will be given a simple choice - pay to view without commercials, or free to view with..
11. brickormortis said...
I think it means people are paying back the same amount (or a bit less) but they aer not able to borrow as easily as before, hence the contraction. It is not that we are paying down are debts in troubled times, it is precisely because of the troubles that lending is restricted. This is what it tells me anyway!
12. mark wadsworth said...
@ Brickormortis, well spotted!
There are other charts (see e.g. Andrew Ellison in Saturday Times) that show monthly gross lending is down from £20 billion (2005-07 long run average) to £10 billion, but net lending is only down from long run average £8 billion to £5 billion. (figures from memory)
Seeing as net lending is gross lending minus repayments, that must mean that monthly repayments are down from £12 billion per month (about £1,000 per mortgage borrower, which seems very high to me but not implausible) to £5 billion.
13. jack c said...
Citywire have coverage on this topic with various facts and figures for those who want to scratch beneath yje BBC headline
See http://www.citywire.co.uk/adviser/-/news/property-and-mortgages/content.aspx?ID=355629&re=6686&ea=118560&Page=1
14. alan said...
UT,
Abolishing the licence fee would be reducing taxes and admin. Can't think of a better way of saving money (and knifing your old enimies at the same time).
I read the article as noting that folk with mortgages are taking advantage of low interest rates. They are keeping their payments the same, thus making a larger capital reduction from the principal.