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decaston

8.1bn-of-mortgage-debt Paid Off

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In the first 3 months britons paid 8.1 billion of their mortgages because of poor interest rates, also it is stated cclearly homeowners are not going to use their equity for house purchase anytime soon! this is more cash not going to prop up the housing market.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that homeowners were unlikely to withdraw equity for the foreseeable future: "There have been some tentative signs of a stabilisation in the property market but it is improbable that housing capital, in the near term, will be viewed as a source of wealth that can be drawn down by home owners to supplement their income."

"Sharply falling house prices have made housing equity withdrawal increasingly unattractive, while very tight credit conditions have made it more difficult to carry out the process as well as to take out new mortgages," said Howard Archer, chief UK economist at IHS Global Insight.

http://www.telegraph.co.uk/finance/finance...tgage-debt.html

Catherine Matthews , a partner at the insolvency practice Tomlinsons said the average UK business was being "strangled by fragile consumer confidence and limited spending on the high street.

"The result is a Catch 22 situation where people won't start spending until the economy and housing market recover, and they feel more confident, but the economy and housing market won't recover until people start to spend," she said.

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Catherine Matthews , a partner at the insolvency practice Tomlinsons said the average UK business was being "strangled by fragile consumer confidence and limited spending on the high street.

"The result is a Catch 22 situation where people won't start spending until the economy and housing market recover, and they feel more confident, but the economy and housing market won't recover until people start to spend," she said.

So instead of giving banks a bonus for failing, why not give taxpayers a bonus for succeeding? This would help consumer confidence in a way that paying bonuses to exiting bankers never will.

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"The result is a Catch 22 situation where people won't start spending until the economy and housing market recover, and they feel more confident, but the economy and housing market won't recover until people start to spend," she said.

Rubbish. Consumers are not spending because they don't have the money to. They are in way way too much debt. The economy will recover when we rebalance our economy, and have enough foreign earned income (i.e. a trade surplus) to pay down our excessive debt pile.

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Rubbish. Consumers are not spending because they don't have the money to. They are in way way too much debt. The economy will recover when we rebalance our economy, and have enough foreign earned income (i.e. a trade surplus) to pay down our excessive debt pile.

Nonsense - most people still have jobs, most people have significantly reduced expenses as interest rates have been slashed.

People are not spending because they are scared, they are hoarding cash. It is a catch 22 - the fact that they are not spending means that there is more pressure put on the economy, which means there is more reason to hoard cash etc etc

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Rubbish. Consumers are not spending because they don't have the money to. They are in way way too much debt. The economy will recover when we rebalance our economy, and have enough foreign earned income (i.e. a trade surplus) to pay down our excessive debt pile.

I agree. Until the trade deficit is reversed, we are by definition building up more and more debt. we could just default though and start again ;)

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Consumers have already spent the money and have no realised they have none.

There is going to be a massive correction to a more sustainable level of economic activity, it's going to be very painful.

This is not a catch 22 as such because the past decade has been unsustainable.

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...this thread links to :

"Scary Chart Of The Week, Those of a Nervous Disposition, Look Away Now" thread

http://www.housepricecrash.co.uk/forum/ind...t&p=2019946

...also when banks make provisions for their bad debts and write them off and sell them to debt collectors at a reduced premium this will reduce the oustanding mortgage lending figures.... <_<

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Nonsense - most people still have jobs, most people have significantly reduced expenses as interest rates have been slashed.

People are not spending because they are scared, they are hoarding cash. It is a catch 22 - the fact that they are not spending means that there is more pressure put on the economy, which means there is more reason to hoard cash etc etc

And many people will be in fear of losing their jobs and know interest rates won't stay this low forever.

If it was just about people spending what they earn, it wouldn't be such a problem. Indeed, you could then argue it was just about confidence. However, the problem is, people have been borrowing to spend - this is entirely unsustainable and I can completely understand why people are trying to pay down debt, rather than borrow even more.

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And many people will be in fear of losing their jobs and know interest rates won't stay this low forever.

If it was just about people spending what they earn, it wouldn't be such a problem. Indeed, you could then argue it was just about confidence. However, the problem is, people have been borrowing to spend - this is entirely unsustainable and I can completely understand why people are trying to pay down debt, rather than borrow even more.

Understandable yes, the problem is this then causes debt deflation, as noted on the other thread.

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