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FTBagain

Halifax House Price Rise A Function Of Debt

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The disparity between the HBOS figures and what we have been observing on the ground could be due to many reasons, but I believe that the huge debt that many are carrying is having a significant impact.

It must be remembered that the banks, including HBOS, base their estimates of the housing market on their mortgage data. If you are a buyer, with outstanding credit card debt, then why not combine the lot into one repayment. Mortgages are still the cheapest way to borrow money. This would make it look like a buyer has paid £10 - £15k more for the house than they actually did.

This idea is supported by the recent data from the BoE (I think) indicating that credit card debt is falling, peopling are suddenly paying off the credit cards. Although debit card payments are rising this could be indicative of people trying to avoid getting back into debt.

Just a thought!

Edited by FTBagain

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This idea is supported by the recent data from the BoE (I think) indicating that credit card debt is falling, peopling are suddenly paying off the credit cards. Although debit card payments are rising this could be indicative of people trying to avoid getting back into debt

Good point - see the demise of the 0% CC, I think there are only two left and am not sure about the qualification reuirements. If people have been using CC debts to "smotth" their income/outgoings then shifting to normal credit card rates would be potenitally very painful, hence the shift to secured debt at the next best rates tied to housing.

Really not sure how this would show itself in the Halifax stats as they are clear as mud.

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Really not sure how this would show itself in the Halifax stats as they are clear as mud.

I have not looked at the stats in detail, only noted the headline figures, but I am guessing that the the mortgage growth as indicated by the HBOS data is growing roughly inline with earnings.

So buyers are still taking out mortgages to the maximum available to them (not very clever IMO if it above 3.5x). We can be pretty sure that house prices are fallen in some cases by as much as 10 - 15%, judging by the posts on here and elsewhere (expats). The gap between HBOS mortgage figures and observed prices provides indebted buyers an opportunity to clear their expensive CC debts.

If this is a significant driver in the figures then we can guess that the HBOS / Nationwide data will go negative when the gap between available mortgages and house prices exceeds the average level of debt.

Hmm...

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The 0% offers have been slowly withdrawn from around some time late last year as each co. in turn stemmed the flow as the rates rose and their defaulters increased. I wonder how long this switchover trend would take in total 6 months/a years tops for the bulk I guess, after that then maybe the lednin figs would start to show the underlying debt trend - having said tha the trend is still massively up - nearly £100bn.

Don't mention financial stability, there is none with this sort of debt growth.

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OK done a quick bit of rough research.

Average unsecured household debt is in the region of £15 - £20k.

Average house price about £167k based on the main measures HBOS, Hometrach, etc)

If house prices are really say about 5 - 8% down on this time last year, observed on here, expats and RICS etc. @ £167k that is a gap of £8 - £13k.

The gap is opening at about £1K per month. That would suggest HBOS would go negative October / November time.

Number are a bit rough, but it fits.

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Saw a 0% on transfer balances  on the tv the other day... small print "2% transfer charge"

:-)

The price drops being mentioned on forums are actually drops in asking prices - Halifax, etc., don't take asking price into account.

So asking prices can fall at the same time as house prices increase.

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This idea is supported by the recent data from the BoE (I think) indicating that credit card debt is falling, peopling are suddenly paying off the credit cards. Although debit card payments are rising this could be indicative of people trying to avoid getting back into debt

Good point - see the demise of the 0% CC, I think there are only two left and am not sure about the qualification reuirements. If people have been using CC debts to "smotth" their income/outgoings then shifting to normal credit card rates would be potenitally very painful, hence the shift to secured debt at the next best rates tied to housing.

Really not sure how this would show itself in the Halifax stats as they are clear as mud.

There are still masses of 0% credit card deals around - I got two new ones only last month.

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I just got a Virgin credit card 0% till 1st june 06. It did say that there is a 2% fee, but Martin (at money saving expert) was sure they won't charge it - and they didn't!

I'll be earning interest on that cash in another savings account! Wicked.

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I know a couple of cases of this, both FTBs. One buys a house and new golf gti at the same time (courtesy of the mortgage), the other took out a massive 115% IO and used part of that extra 15% to go on holiday..........

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It must be remembered that the banks, including HBOS, base their estimates of the housing market on their mortgage data. If you are a buyer, with outstanding credit card debt, then why not combine the lot into one repayment. Mortgages are still the cheapest way to borrow money. This would make it look like a buyer has paid £10 - £15k more for the house than they actually did.

Nice try, doesn't work. The Halifax index is based on the total amount paid for mortgaged properties, not just the size of the mortgage advance. So if buyers increase their LTV ratio in order to raise extra funds to clear other debts, it doesn't affect the Halifax index.

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It must be remembered that the banks, including HBOS, base their estimates of the housing market on their mortgage data. If you are a buyer, with outstanding credit card debt, then why not combine the lot into one repayment. Mortgages are still the cheapest way to borrow money. This would make it look like a buyer has paid £10 - £15k more for the house than they actually did.

Surely this can't happen as you describe it. Remortgaging your home to pay off a credit card bill is one thing. Getting a loan approval based on the value of your home is quite another.

The Halifax figures aren't based purely on the value of loan approvals but on a surveyors estimate of what the loan is secured against.

Of course the distortion you describe could easily come about via the plethora of inducements offered for new properties (gifted deposits, gifted cars), but that is another story.

Edited by Sledgehead

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I don't care how Halifax arrived at its figures, what manipulation was done and what selectivity is used. As in the last house price recession (see Halifax announcements in 1989, 1990, 1991 and 1992), the Halifax is lying to the the public. Any child could see that prices are falling nationwide, with a few very minor exceptions.

If the Halifax is going to play the market up in this way (and that is what, historically, they have always done), then it is incompetent and dishonest of the BBC or anyone else to publish the figures as fact without:-

1) Asking for clarification and methods

2) Inviting a rebuttal from independent people

3) Asking searching questions within the article

Of course, completely undiscerning and ignorant people will read this and assume that there is not going to be a crash, but it is already happening. No wonder the average bloke is difficult to divert from the fantasy that houses always go up.

I'm surprised there isn't more outrage here.

VP

Edited by VacantPossession

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Wouldn't it be awful if the MPC took the Halifax figures serioulsy, and put rates back up 'to cool the market'

Am I the only one that remembers last month's flurry of articles from every corner of the business world clamouring for a rate cut.

Very quiet this month...

ABB

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Guest Charlie The Tramp
This idea is supported by the recent data from the BoE (I think) indicating that credit card debt is falling, peopling are suddenly paying off the credit cards. Although debit card payments are rising this could be indicative of people trying to avoid getting back into debt.
Britain's personal debt is increasing by £1 million every four minutes.

At the end of July 2005 the total UK personal debt was £1,114bn. The growth rate remains strong at 10.7% for the previous 12 months. 2004 saw the largest single-year increase in debt (£116bn) since the Bank of England was founded in 1694.

Well I have more faith in Credit Action stats.

Retail spending down, well how about their missing customers taking out more credit cards to pay off the debts on the old. <_<

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  • 332 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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