Disposable Income

[Blue Nose Bear]

Lots of talk around here about IRs, pound devaluation, tax rises etc etc

While these can and would be significant drivers towards HPC, they all impact individuals at varying levels.

i.e. if you own your house outright IRs have little impact, nor directly would pound devaluation. Tax rises will impact the vast majority of people and are a dead cert for the coming months.

This is obvious as all parties are avoiding the real issue at the moment - addressing the debt.

So whats going to happen over the next 6-12 months:

IRs may or may not rise, all the main parties say they will keep them low. Why? because saying they will rise is a vote loser. However the decision will ultimately be out of thier hands and IMO they will rise within 12 months if not sooner.

Pound devaluation - the world financial system is in turmoil, large fluctuations are expected in this climate and will continue for many months. A plan to devalue a currency in this climate is highly unlikely as it would be totally uncontrollable.

Taxes - Here's the clincher, TAXES WILL RISE post election whether directly or by stealth, all will be far worse off in 6 months than they realise.

And this on it's own will start HPC, rising IRs, -ve wage rises, cuts in public spending and job losses both public and private sector will accelerate the crash.

Sorry mortgage owners you're too late to get out unless you pre-empt the crash and take a big hit now.

Owner/occupiers (i.e. You hold the deads to your dwelling) - Your main asset value is gonna get trashed.

Disposable income for all in the UK is about to be squeezed until it squeaks for the next few years, are you in a position to absorb this?

[Blue Nose Bear]

Lots of talk around here about IRs, pound devaluation, tax rises etc etc

While these can and would be significant drivers towards HPC, they all impact individuals at varying levels.

i.e. if you own your house outright IRs have little impact, nor directly would pound devaluation. Tax rises will impact the vast majority of people and are a dead cert for the coming months.

This is obvious as all parties are avoiding the real issue at the moment - addressing the debt.

So whats going to happen over the next 6-12 months:

IRs may or may not rise, all the main parties say they will keep them low. Why? because saying they will rise is a vote loser. However the decision will ultimately be out of thier hands and IMO they will rise within 12 months if not sooner.

Pound devaluation - the world financial system is in turmoil, large fluctuations are expected in this climate and will continue for many months. A plan to devalue a currency in this climate is highly unlikely as it would be totally uncontrollable.

Taxes - Here's the clincher, TAXES WILL RISE post election whether directly or by stealth, all will be far worse off in 6 months than they realise.

And this on it's own will start HPC, rising IRs, -ve wage rises, cuts in public spending and job losses both public and private sector will accelerate the crash.

Sorry mortgage owners you're too late to get out unless you pre-empt the crash and take a big hit now.

Owner/occupiers (i.e. You hold the deads to your dwelling) - Your main asset value is gonna get trashed.

Disposable income for all in the UK is about to be squeezed until it squeaks for the next few years, are you in a position to absorb this?

[Executive Sadman]

I wonder if Interest Rates matter much in american elections, as most are on 15 or 30 year fixes. Do savers dictate elections there?

[abharrisson]

Lots of talk around here about IRs, pound devaluation, tax rises etc etc

While these can and would be significant drivers towards HPC, they all impact individuals at varying levels.

i.e. if you own your house outright IRs have little impact, nor directly would pound devaluation. Tax rises will impact the vast majority of people and are a dead cert for the coming months.

This is obvious as all parties are avoiding the real issue at the moment - addressing the debt.

So whats going to happen over the next 6-12 months:

IRs may or may not rise, all the main parties say they will keep them low. Why? because saying they will rise is a vote loser. However the decision will ultimately be out of thier hands and IMO they will rise within 12 months if not sooner.

Pound devaluation - the world financial system is in turmoil, large fluctuations are expected in this climate and will continue for many months. A plan to devalue a currency in this climate is highly unlikely as it would be totally uncontrollable.

Taxes - Here's the clincher, TAXES WILL RISE post election whether directly or by stealth, all will be far worse off in 6 months than they realise.

And this on it's own will start HPC, rising IRs, -ve wage rises, cuts in public spending and job losses both public and private sector will accelerate the crash.

Sorry mortgage owners you're too late to get out unless you pre-empt the crash and take a big hit now.

Owner/occupiers (i.e. You hold the deads to your dwelling) - Your main asset value is gonna get trashed.

Disposable income for all in the UK is about to be squeezed until it squeaks for the next few years, are you in a position to absorb this?

Yes thanks.....

But in essence I agree with you that the measure of household financial pressure is disposable income.... I just don't agree that things are going to so significantly tighter for enough people that it will cause a crash.... disposable income will become tighter but I don't think it's nearly big enough ( yet) to act as the trigger a further leg down needs.

[pyewackitt]

This is the same as the old 'affordability' trap where people measure what they can afford based on monthly repayments at current rates, not on the actual 'value' of an asset or good/service.

As per another recently discussed story:

http://news.bbc.co.uk/1/hi/uk/8608935.stm

People in the UK are saving less than at any time in the past 40 years, according to the Office for National Statistics (ONS).

The household saving ratio in the UK in 2008 was 1.7% of total resources, the lowest recorded since 1970, and well below the 7.6% average for that period.

There is nothing left to squeeze. Many people have no money left to save, ergo either we have a lot of people out shopping and spending their disposable income (which we know they aren't or the high street shops would be posting record profits not losses) or... they are paying down already accumulated debts and struggling hard to make it meet... which is far more likely.

Of the three main parties only the Lib Dems actually have a strategic plan to decrease taxation on lower to mid income families which would allow for more disposable income... however... firstly they wont get in and secondly i don't think they read the budget right, because we're in a huge deficit at present with national debt increasing substantially. Yes cutting some taxes might stimulate the economy... but it also might go horribly wrong as you still have to reduce deficit spending and pay down national debt eventually.

So disposable incomes... fewer people than ever seem to have any...

[Blue Nose Bear]

Yes thanks.....

But in essence I agree with you that the measure of household financial pressure is disposable income.... I just don't agree that things are going to so significantly tighter for enough people that it will cause a crash.... disposable income will become tighter but I don't think it's nearly big enough ( yet) to act as the trigger a further leg down needs.

No (yet) agreed,

But the emergency budget is no more than 3-4 months away.

Edited April 14, 2010 by Agent Provocateur

[Timm]

The old fashioned assumption was that housing costs tended to extract surplus income as rent.

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them; and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land ...

Edited April 14, 2010 by Timm

[Blue Nose Bear]

This is the same as the old 'affordability' trap where people measure what they can afford based on monthly repayments at current rates, not on the actual 'value' of an asset or good/service.

As per another recently discussed story:

http://news.bbc.co.uk/1/hi/uk/8608935.stm

There is nothing left to squeeze. Many people have no money left to save, ergo either we have a lot of people out shopping and spending their disposable income (which we know they aren't or the high street shops would be posting record profits not losses) or... they are paying down already accumulated debts and struggling hard to make it meet... which is far more likely.

Of the three main parties only the Lib Dems actually have a strategic plan to decrease taxation on lower to mid income families which would allow for more disposable income... however... firstly they wont get in and secondly i don't think they read the budget right, because we're in a huge deficit at present with national debt increasing substantially. Yes cutting some taxes might stimulate the economy... but it also might go horribly wrong as you still have to reduce deficit spending and pay down national debt eventually.

So disposable incomes... fewer people than ever seem to have any...

What individuals do with thier disposable income, save it, put it under the matress, spend it wisely or waste it on tat makes no difference, the fact is thet will have much less in 6-12 months.

Those with non now are going to suffer quickly.

So the Lib Dems would reduce the tax burden, OK. Have they happened to mention how they are going to address the deficit and the debt.

[headrow]

Owner/occupiers (i.e. You hold the deads to your dwelling) - Your main asset value is gonna get trashed.

That won't affect my disposable income one little bit thank you

[libspero]

IRs may or may not rise, all the main parties say they will keep them low. Why? because saying they will rise is a vote loser. However the decision will ultimately be out of thier hands and IMO they will rise within 12 months if not sooner.

I wouldn't write off IR rises as an important factor, although there are many straws to beat the camel.

The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump.

Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.

Some firms, like Morgan Stanley, are predicting that rates could rise by a percentage point and a half by the end of the year. Others, like JPMorgan Chase are forecasting a more modest half-point jump.

This is from an American article, I hasten to add, but contagiously relevant I feel.

Linky

[Blue Nose Bear]

That won't affect my disposable income one little bit thank you

err......thanks for that

[fallingbuzzard]

Principles matter more in American elections

I wonder if Interest Rates matter much in american elections, as most are on 15 or 30 year fixes. Do savers dictate elections there?

[Winston Wolf]

Dont under estimate the amount of belt tightening available to people when they absolutely HAVE to do it.

Most will protect the roof over thier heads above all else, prices may go down, but in a potentially inflationary environment maybe not.

No trashing is going to occur whatever..

Move along now nothing to see here...

[Timm]

Dont under estimate the amount of belt tightening available to people when they absolutely HAVE to do it.

Most will protect the roof over thier heads above all else, prices may go down, but in a potentially inflationary environment maybe not.

No trashing is going to occur whatever..

Move along now nothing to see here...

That is not what is happening in the US.

[Mixle]

Pound devaluation - the world financial system is in turmoil, large fluctuations are expected in this climate and will continue for many months. A plan to devalue a currency in this climate is highly unlikely as it would be totally uncontrollable.

Pound is a floating currency. As it is not pegged to anything, the government can't choose to devalue it by a certain amount, even if they print that specific amount. It rises and falls against other things on the market, and has recently fallen about 30% against arbitrary baskets of other things.

Disposable income for all in the UK is about to be squeezed until it squeaks for the next few years, are you in a position to absorb this?

Yes

Edited April 14, 2010 by Mixle

[pilchardthecat]

Not sure about this.

PAYE employees are going to get screwed by NI, true, but pensioners, the self employed, contractors, etc will probably get tax cuts. Some people will get more benefits, tax credits, etc.