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23% Of Owners On 50K Pa + In Negative Equity!

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Interesting piece of reseach by one of Cleardebt (large IVA provider) bloggers (see link below).

His finding is based on a survey of 24,000 'debt worriers' who contacted Cleardebt between 2005 and 2010.

Proof if it was ever required that 'owners' of high-value houses are more likely to take on massive debt to finance their spend-free lifestyle.

The blogger, Andrew Smith, reckons that this is a 'small crisis waiting to happen'. To use the word crisis is obviously right, but not sure about small (he should look at what's happening in the US !)

http://www.cleardebt.co.uk/blog/home-owners-and-personal-debt_26572

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His finding is based on a survey of 24,000 'debt worriers' who contacted Cleardebt between 2005 and 2010.

A survey of people in debt shows a large percentage of them are in debt shocker.

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A survey of people in debt shows a large percentage of them are in debt shocker.

Quite so but the point is that in the sample group, high earners (£50K pa +) are far more likely to be in NE as they have tended to borrow more against their higher value houses as they felt more confident that prices would not fall ......

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Simple sums

People who have (or had in a lot of cases) high (50K+) were able to borrow more than someone earning an average way, say 20K.

At the peak, people were being offered - and taking - 5x salary mortgages:

5 x 20K = 100K

5 x 50K = 250K

Fast forward, the banks that are lending 3 x, giving:

100K - 60K(3 x 20K) = 40K difference.

250K - 150K (3 x 50K) = 100K.

A house is worth only what someone pay for it.

Most people buy a house with mortgage.

Therefore the hosue is only worth what a person can borrow.

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A survey of people in debt shows a large percentage of them are in debt shocker.

Debt and negative equity are different things.

It is interesting, because if you think about the way people earn and spend money, there is a level of expenditure that we all practically have to make. We can only save and build up equity to any great degree, if our incomes are above that base level.

So these people earning over 50 grand a year, should have the cash to allow themselves to build up equity, be it paying back capital on mortgages, or just saving larger deposits in the first place, or not having to borrow against their property.

Despite this advantage, it seems that many have blown it, overestimating if you like, just how much real income they have.

Still not to worry, SMI will save them.

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I think we have a winner for this month's most contrived, misleading statistic award.

Shocking.

Granted I have sexed up the thread title but the statistics based on the 24.000 strong sample are sound - 23% of those earning over £50K pa, in that sample, are in NE as opposed to an average of 10% for lower earning groups in that same 24.000 strong sample. I rest my case.

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Simple sums

People who have (or had in a lot of cases) high (50K+) were able to borrow more than someone earning an average way, say 20K.

At the peak, people were being offered - and taking - 5x salary mortgages:

5 x 20K = 100K

5 x 50K = 250K

Fast forward, the banks that are lending 3 x, giving:

100K - 60K(3 x 20K) = 40K difference.

250K - 150K (3 x 50K) = 100K.

A house is worth only what someone pay for it.

Most people buy a house with mortgage.

Therefore the hosue is only worth what a person can borrow.

How far in the future do we have to fast forward? So we can check if your prediction is correct.

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£50K - high earner ???

If you were the only bread winner and had a family to support, you would not feel like a high earner on this salary.

I wouldn't class anything less than about £100 - 120K per household as "high earning" in this day and age

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50K is a high earner.

50K will put you in the top 10% wages.

That's part of the problem in respect to house prices - the average, and above average, and above above average person cannot afford a small house.

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Spot on spyguy. I live in N London. Earn comfortably more than £50k, have a pretty big deposit and still can't afford a decent house!

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£50K - high earner ???

If you were the only bread winner and had a family to support, you would not feel like a high earner on this salary.

Excluding the cost of housing, a £50k salary goes a long long way if you're not wasteful, even with a family.

Of course, the stupid race-to-the-top housing bubble has put up the cost of living for everyone with no real winners.

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That's part of the problem in respect to house prices - the average, and above average, and above above average person cannot afford a small house.

Indeed, I can't remember where I read it, but most people couldn't afford the buy the house they live in, prices have spiralled up that much.

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Indeed, I can't remember where I read it, but most people couldn't afford the buy the house they live in, prices have spiralled up that much.

Reminds me of a story I heard of an IT contractor who went to the middle east in the early noughties to earn some serious money for a couple of years. The only problem was he sold his house before emigrating and when he came back he found he couldn't even afford to buy his old house back again.

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  • 284 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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