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Thousands Face Debt Ruin

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Charlie the Tramp has been drawing our attention more and more towards debt. Whilst most of us have had our radar locked on interest rates Charlie has consistently argued that debt could be the real trigger. We are aware now that a few small .25% cuts in rates will have no real effect on the market so perhaps interest rates have been a red herring all along.

http://www.thisismoney.co.uk/credit-and-lo...page_id=62&ct=5

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Charlie the Tramp has been drawing our attention more and more towards debt. Whilst most of us have had our radar locked on interest rates Charlie has consistently argued that debt could be the real trigger. We are aware now that a few small .25% cuts in rates will have no real effect on the market so perhaps interest rates have been a red herring all along.

http://www.thisismoney.co.uk/credit-and-lo...page_id=62&ct=5

No actually low interest was the trigger.

1) It allowed people looking at only the monthly repayment cost, to borrow far more than they rationally could increasing prices beyond the point that they made any sense whatsoever.

2) it opened the credit taps so any man and its dog could borrow enough money to bankrupt themselves if anything changed.

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Guest Charlie The Tramp

From one of my previous threads.

Even the so called well off are in the s**t.

It`s across the board this time.

To their friends and neighbours. they probably seem like high fliers who are sitting pretty. They earn at least £50,000 a year, have high powered jobs, big houses, and expensive cars.

But looks are notoriously deceptive and debt experts warn that impoverished professionals are on the increase.

There has been a sharp rise in the number of people or families who take home £3,000 a month net but are seeking help from the Consumer Credit Counselling Service.

Large numbers of middle class families seem to have gone deep into hock through credit cards, loans and remortgages to keep up appearances.But rises in interest rates and higher household bills have driven many to the edge of financial meltdown.

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From one of my previous threads.

Even the so called well off are in the s**t.

It`s across the board this time.

I have just rented a house. Went out to buy some furniture, they wouldnt give me discount for cash so I got it on 0% better the money earn interest in the bank I thought. Anyway, this was the scary thing. All I needed was my Bank switch card to get credit!!! I was in shock!!! What happened to the days of bank statements, proof of address etc? It just seemed far to easy to me, its a no wonder people are in so much debt!!!

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From one of my previous threads.

Even the so called well off are in the s**t.

It`s across the board this time.

Agreed, it is the middle class that is getting mullered with taxation and costs. It is also the middle class that the whole housing ladder relies on because that is where the rump of the purchasers comes from.

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Guest Charlie The Tramp

'Rate cuts won't help reduce debt'

Jim Armitage, Evening Standard

28 June 2005

HOUSEHOLD debts are now so high that even interest rate cuts will not help hundreds of thousands of people to get out of financial trouble.

That is the gloomy conclusion of one of the City's most respected economists, who claims the total burden of debts, including the interest and principal amount borrowed, is at its highest since 1989 - just before recession struck.

The 'buy now, pay later' culture created by low interest rates has encouraged people to go on shopping splurges with credit, rather than save up and buy goods when they can afford it.

In the 1980s, people became unable to service their debts because of a surprise spike in interest rates. But now, with rates at relatively low levels, it is the principal loan, rather than the interest repayment, that is proving the biggest burden. Faced with this looming crisis, the Bank of England's ability to cut interest rates is rendered almost powerless.

'Households have suffered from money illusion,' said ABN economist James Carrick. 'Though interest payments remain affordable, households are struggling to repay the debt principal in a low inflation world.'

ABN Amro argues that the Bank would rapidly have to slash the cost of borrowing by almost half - from the current 4.75% to 2.5% - for householders to allow people to start repaying their principal debt in any meaningful way. Even with the recent flurry of negative news on the economy, the Bank's monetary policy committee would never take such action. The wider impact of consumers' 'money illusion' will be to hold back economic growth drastically. Not only are people having to rein in spending to service debts, they have also bought so many items such as refrigerators, TVs and other expensive goods that little in their homes now needs replacing.

ABN is not the only City institution worried about sky-high borrowing by consumers. The Bank of England yesterday urged High Street banks to share their information on customers applying for credit cards to prevent people taking on too many loans.

It cautioned that a 'significant proportion' of debtors borrow from more than one lender, so individual banks do not have a full picture of their, sometimes perilous, financial situations.

The Bank's Financial Stability Review warned the rapid growth in lending posed a potential long-term threat to economic stability.

A rise in personal insolvencies to levels 30% above their peak in the early 1990s was linked to the rise in household borrowing, it said.

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Debt "may be" the trigger? I don't think so, IT IS and will be the trigger.

All these imaginary homeowners do not exist. No one owns a home until the mortgage is paid in full, there is no MEWing against the home or any property secured wonderful "home owner" loans locked into the property.

All of these imaginery home owners are just renting from the mortgagee's, banks and "home owner" loan sharks, to a man/woman they are living in an Alice in Wonderland imaginary fantasy world of sheer insanity when the believe they own their own home. Just default on a few payments and it will be taken from them and they can then be hounded for years for any shortfall.

Probably as many as 40% of the population well and truly up S**t Creek this very day with not a hope in the world of getting out of the mess they are in.

Edited by Serpico

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Guest Charlie The Tramp

Well it was not my fault Guv. :(

The lenders and their staff knew what they were doing. They are all self gain and don`t give a s**t if the country goes to the dogs. Absolutely no morals, and those who would not play the game probably were the next redundancies. :angry:

Whose fault are the defaults?

HSBC's warning of an increase in personal debt defaults follows similar comments by HBOS, Alliance & Leicester, Barclays and Lloyds TSB. But it is difficult to feel sympathy when banks have been offering incentives to staff to sell personal loans and the lucrative associated insurance.

Personally, I wouldn't lend a penny to anyone unless I was sure they had the ability to repay it. But some staff and banks have been so keen to lend that they have often had scant regard for carrying out checks, allowing people to fabricate income figures.

There have also been far too many cases of people being lent money who, because of mental incapacity, are clearly unable to look after their own financial affairs. Once again it seems that while incentives have boosted sales, the checks and balances put into place by senior management are inadequate.

The industry has also scored an own goal by the refusal of some to share data - an issue which vexes HSBC's chairman, Sir John Bond. The bad debt issue may be occupying only the City scribblers for now, but the wholly avoidable human misery caused by profligate borrowing and lax lending will soon be hitting the front pages of newspapers once again.

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It's easy to blame the lenders, but franlky individuals are responsible for their own actions. They are, after all, "adults". It doesn't take a genius to realise that it isn't a good idea to bite off more than you can chew. Ya might choke.

All i can say is this country is full of morons with more money than sense!

I mean, how the hell do you land a high paid job and still not understand the basics of income vs expenditure?

Oh well natural selection will sort it out, i expect there will be a major rise in suicides next.

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Guest Charlie The Tramp
I mean, how the hell do you land a high paid job and still not understand the basics of income vs expenditure?

Because they did not have to sit the eleven plus examination dealing with the mathematics of integers under simple operations such as addition, subtraction, multiplication, division, involution, and evolution. Learning the art of counting or problem-solving involving arithmetic operations, having been told that IRs at 3.5% was free money and believing it. :rolleyes:

It's easy to blame the lenders, but franlky individuals are responsible for their own actions.

Agreed, but the lenders were the ones throwing money at the lemmings with no checks whether they could pay it back, more so on secured loans MEW. Not to worry we can seize their property if they default. <_<

Personally, I wouldn't lend a penny to anyone unless I was sure they had the ability to repay it. But some staff and banks have been so keen to lend that they have often had scant regard for carrying out checks, allowing people to fabricate income figures.

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No actually low interest was the trigger.

1) It allowed people looking at only the monthly repayment cost, to borrow far more than they rationally could increasing prices beyond the point that they made any sense whatsoever.

2) it opened the credit taps so any man and its dog could borrow enough money to bankrupt themselves if anything changed.

LOL, succinctly put in point 2.

Some people forget that debt repayments (let's get away from using this euphemism of "credit"), are a product, in the arithmetical sense, of two numbers; the capital and the interest rate.

Multiplication is great because an increase in either number causes the product to increase! But I think people have been bamboozled by single digit interest rates and entirely forgotton to multiply this by the capital they are borrowing.

So they think that any loan at, say, 5% is cheap. Well it isn't if it's £250k that's being borrowed.

Many forget about the term of the loan too, so you get debt consolidation adverts on TV where you end up with a lifetime of constant debt repayments. "Affordable poverty" someone said in another thread. An interesting way of putting it.

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Why do some people think they are SAVING money when they,

- Increase their borrowing.

- Increase the term of the loan.

- Reduce their monthly loan repayments.

Surely they end up paying MORE NOT SAVING.

REMEMBER THE MORE YOU BORROW THE LONGER YOU HAVE TO WORK.

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Why do some people think they are SAVING money when they,

- Increase their borrowing.

- Increase the term of the loan.

- Reduce their monthly loan repayments.

Surely they end up paying MORE NOT SAVING.

REMEMBER THE MORE YOU BORROW THE LONGER YOU HAVE TO WORK.

Quite simply a widespread lack of numeracy...to a SHOCKING degree. I genuinely believe that a lot of people are simple too thick and uneducated to properly appreciate even simple mathematical concepts such as debt, interest, the principal etc etc. And this includes so called 'professionals' - There are lots of people in this country with well paid jobs, think they are the tits, but genuinely incapable of basic mathematical reasoning.

Mind you, I also think part of the problem is the social contract has gone out of the window - it used to be the case that you could trust 'experts' (EAs, mortgage advisors, bankers, other VIs), now it just seems like they are there to exploit you - and the first step to this is to deceive you. People need to get educated to prevent this from happening - I guess it is worse now because the economy is more complex and integrated and therefore there are more opportunities for exploitation. Think about it...in the days of the caveman there was no exploitation because there was no trade or economy....move forward a bit and exploitation starts to kick in (feudalism, tithes...)...as the economy gets more complicated, the degree and subtlety of the exploitation increases, until we get to the point now where bankers and other VIs sit at the top of the pile and exploit the HELL out of a lot of stupid people and they don't even realise it is happening! Despicable (but clever).

So for those of you who think the economy is going to meltdown...be thankful, at least there will be less exploitation after it finally does.

Incidently here is an article today in the telegraph:

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

A-levels are getting easier, says report

By Liz Lightfoot

(Filed: 15/08/2005)

The Government was embroiled in a row over A-level standards yesterday as a report claimed that some candidates getting an A-grade this week would only have been awarded a C or D in 1988.

Nearly half the public and 43 per cent of 18- to 24-year-olds believe that the exam is easier to pass, compared with only 10 per cent who say it has got harder, according to the report by Reform, an independent think tank.

Head teachers insisted yesterday that their pupils were reaching as high a standard as in previous years but admitted that the Government's changes to the exam format - which includes the opportunity to resit papers - had made it easier to do well.

The furore over the results, which will be announced on Thursday, took the exam boards by surprise. They had hoped to head off any criticism of the expected increase in pass rates and A- grades by delaying publication of the statistics until after students had collected their results.

Sources confirmed over the weekend, however, that the results will show a 16th successive increase in the proportion of subject entries awarded an A-grade. It is expected to hit 23 per cent, or nearly one in four. The pass rate is also predicted to show an increase on last year's 96 per cent.

Labour is sensitive to claims that the results reflect easier exams because it has made higher standards in schools a key manifesto promise and spent hundreds of millions of pounds on initiatives.

The report by Reform looks at attempts by academics to determine whether the A-level standard has been maintained over the years. It concludes that evidence clearly suggests that the exam has become easier, even when the content has remained similar.

It compares the A-level pass rate, which has gone up from 81 per cent in l993 to 96 per cent last year, with that of the International Baccalaureate, which has hovered between 81 and 84 per cent.

"Students' abilities have improved but by far less than that implied by the official statistics," the report concludes. It traces the start of the decline in standards to 1988 when the Department for Education took over responsibility for regulating exams.

"In addition, since the early 1990s the department has taken responsibility for increasing the number of students passing public examinations. The result is a clear conflict of interest and a structure in which the department has a clear incentive to allow standards to fall," it says.

Among the studies it cites are monitoring reports from the Curriculum Evaluation and Management Centre of Durham University, which found that pupils of the same ability achieved between one and a half and three grades higher in 2004 than they would have done in l988. "A student achieving a grade E in mathematics in l988 would achieve a grade B now," said the Reform study.

A Department for Education spokesman said: "What the evidence shows is that standards are being maintained. Indeed, it's not the grades that have been dumbed down, but the arguments of those who want to hold children back."

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

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Interest rates a total red herring, and those who reckon falling IRs will boost the property market and consumer spending are dead wrong. Falling IRs are the sign of an economy in trouble, witness Japan and what happened to their property market and spending.

We're heading for depression territory, but no one seems to think I'm correct. They're all fretting about inflation!!

Eagerly awaiting the reaction from the BRC and property people when the .25% cut will have done nothing. In fact I expect the consumer spending figures to be worse AFTER the cut, and we all now know house prices are on an inexorable down-slope.

Just wait until the autumn/xmas.

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It's very unfair to say the A levels are getting easier. I think teenagers have to work really hard to do so well.

When I did mine (about 14 years ago) I did as little as possible and still managed to scrape into Uni, but my father and younger sister are waiting for their results at the moment and whenever I flicked through one of their books I was very impressed by the depth of knowledge they require. My father has worked very hard for them, sister not so much (more interested in "socialising").

I think that comparing todays exam with the exam from 1970's is not really relevant as they have different subject matter. I know that if you went back in time and gave a 2005 paper to a pupil from 1970 they'd be just as flummoxed.

BTW a lack of numeracy is not just a problem for the under 25's. I know people with MAJOR debt of all ages.

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Some people blame homeowner greed for the roots of the house price boom, but homeowners act rationally when they try and maximise the money they get for selling their house. You can't criticise people for acting in their rational interests.

The real reason for the boom is irrational behaviour by buyers who have been prepared to leverage themselves beyond any safety margin to buy overpriced houses. Even a mild recession will topple many thousands of these people into ruin.

Many posters subscribe to free market ideas about the economy. A fundamental principle of free market economics is the notion of the well-informed consumer making rational decisions that drive the market.

But the last few years have shown us that most consumers can not be expected to behave rationally. A very common theme in the debt threads like this is the "stupidity of punters". But what causes people to act against their own interests?

Is it that they are overwhelmed with advertising messages and direct mail encouraging them to see loans as a solution to all their problems? Where is the counterbalancing influence in our culture with a message of financial prudence and the virtue of living within your means?

This question bothers me because I would like to believe that my fellow humans are rational beings, but every year I get older I find it harder not sink deeper into cynicism about humanity. :unsure:

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This being the start. No they are not paying their debts off.

Are they panicking now.  <_<

Government To Spend £45 million To Help Those With Unmanageable Debts

Good grief! How about teaching kids this stuff in schools?

Teach them what a current account is, how debt works, how credit cards work, how to spot scams, basic numeracy, household budgeting, thinking for yourself. No wait, scrap the last one, because the government will never allow that.

While they're at it, teach them how to do practical stuff too, like basic car maintenance, wiring a plug, what vegetables are, etc., etc.

£45 million to nanny people and tell them everything is alright.

I once saw a (fake) advert in Viz that went along the lines of:

"Learn how to stop being gullible. Send £5000 to PO Box 12345."

That's about the size of it.

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Some people blame homeowner greed for the roots of the house price boom, but homeowners act rationally when they try and maximise the money they get for selling their house. You can't criticise people for acting in their rational interests.

Yes you can. If I kill my aunt to inherit her money, I am acting in my own rational interest. Is that not something you would criticise?

The real reason for the boom is irrational behaviour by buyers who have been prepared to leverage themselves beyond any safety margin to buy overpriced houses.

If the levels of HPI of the last few years had continued, buying at these prices would have been rational, as sure, you would have paid a lot for the house, but you would also make a lot.

Even a mild recession will topple many thousands of these people into ruin.

The period of uninterrupted UK economic growth from 1992 til now has lulled people into a false sense of security.

Where is the counterbalancing influence in our culture with a message of financial prudence and the virtue of living within your means?

Err, and in whose interest would it be to promote such a message? Not the government. Not the credit card industry. Not the banks. Not the high street retailers.

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  • 302 Brexit, House prices and Summer 2020

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      • down 5% +
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