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easy2012

Household Isn't Paying Down Debt Despite Low Ir

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http://www.bankofengland.co.uk/publications/quarterlybulletin/qb110205.pdf

The amount of housing equity withdrawal (HEW) has swung from being significantly positive before

the financial crisis and recession, to negative over the past few years. The net effect of a chain of

housing transactions is typically a large equity withdrawal. The fall in the number of housing

transactions is therefore likely to have been a key driver of the fall in equity withdrawal since the

financial crisis. There is little sign that, at the aggregate level, households are making an active

effort to pay down debt more quickly than in the past.

Certainly think my next door will opt for a holiday rather than paying down mortgage... but yet 0.5% rate

is BoE official policy..

Also explain how First Time Buyer need to inject hard earned cash (err...equity) so that last time buyer can withdraw them...

Edited by easybetman

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No incentive to. Clearly they don't want people to pay down debt.

Damn right the government don't

The minimal growth that the economy is currently still forecast to generate over the next few years is from households taking on more debt.....fat chance...

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Damn right the government don't

The minimal growth that the economy is currently still forecast to generate over the next few years is from households taking on more debt.....fat chance...

....no growth without debt. :P

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No incentive to. Clearly they don't want people to pay down debt.

So much for 2 years of ZIRP.

The BoE's implicit wink for the overtly debted was:

1) Pay off as much of the capitla to avoid going bust when IRs normalise i.e. 5 or 6%

2) Sell house to someone who can afford it.

Off the people I know, only one has followed this - paid of some of the capital to allow him to shift the house without the bank objecting.

The other 5 or 6 have just spent the IR savings. Total nuts.

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It appears that we are set to increase total borrowing from the current 1.6 trillion to 2.1 trillion in the next four years, according to an article in the Telegraph this weekend.

Worryingly now food, fuel and a few other essentials have gone up to more realistic levels, coupled with our profligate chavy spending habits, we can't even service debt at these record low rates.

One thing for sure with our credit lines from abroad spent, there is absolutely no scope left for another increase in house prices but plenty of scope for futher corrections beyond the -25% + (real) we have alredy experienced since 2007.

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No incentive to. Clearly they don't want people to pay down debt.

Of course they don't want that to happen, think of the short term implications to the economy.

However in a few years time there could be quite a few people regretting the holiday etc... instead of paying down the debt making their servicing costs affordable.

Plus maybe many in debt are using the extra cash to keep their current lifestyle going.

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So much for 2 years of ZIRP.

The BoE's implicit wink for the overtly debted was:

1) Pay off as much of the capitla to avoid going bust when IRs normalise i.e. 5 or 6%

2) Sell house to someone who can afford it.

Off the people I know, only one has followed this - paid of some of the capital to allow him to shift the house without the bank objecting.

The other 5 or 6 have just spent the IR savings. Total nuts.

No they are patriotic citizens spending their income and capital to march the economy back into growth...

...sustainable growth based on a solid manufacturing base...

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**** the ****ing bed. People in reluctance to pay back free money shocker.

Who knew?

Indeed. Stupid is as stupid does.

If they were daft enough to get 10x liar loans, then what's to say they'll get a clue and start being sensible with money.

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When my mortgage is at 2.19% and my NS&I certs are at RPI+1%, then there is no point trying to reduce the mortgage.

+1

when I am borrowing at 0.67% and can get 5% in an isa why should I be paying down my mortgage?

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+1

when I am borrowing at 0.67% and can get 5% in an isa why should I be paying down my mortgage?

Much like the banks are doing with the BoE.

"doing a Barclays"

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Also, falling house prices erode equity.. so people maybe paying down the debt, but if the house is falling faster, you still have less equity.

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There is little sign that, at the aggregate level, households are making an active

effort to pay down debt more quickly than in the past...

Addicts don't give up on their own.

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+1

when I am borrowing at 0.67% and can get 5% in an isa why should I be paying down my mortgage?

Congrats you are obviously an investment genius...

...not to late to stand for head of the IMF or bid for northern rock...

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When my mortgage is at 2.19% and my NS&I certs are at RPI+1%, then there is no point trying to reduce the mortgage.

+1

Was a little late to the game myself, having just taken out a mortgage, but a mortgage at 2.39% and NS&I certs at RPI+1% really is a no-brainer. The fact that such opportunities to make free money exist is surely an indication that something is seriously out of kilter with our economy.

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We've gone for the debt paying down route by getting an offset mortgage and putting our savings against it.

Means we've gone from a £100k mortgage to a £6k mortgage in a little under a year albeit we have all our eggs in one basket.

I'm sure there are better ways of using our money to maximise income but I like the idea of no rent / mortgage payments ever again.

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We've gone for the debt paying down route by getting an offset mortgage and putting our savings against it.

Means we've gone from a £100k mortgage to a £6k mortgage in a little under a year albeit we have all our eggs in one basket.

I'm sure there are better ways of using our money to maximise income but I like the idea of no rent / mortgage payments ever again.

Me too, but I found the opportunity to borrow an extra 30K at (currently) 2.39% in order to allow my NS&I certs to remain invested at (currently) 6.2% too good a chance to make approx £1,000 of free money per year to miss.

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economics 101 - massively reducing the price of something [e.g. debt] does not, as a rule, tend to send customers rushing in their droves to consume far less of it.

....I would say a lot depends on how deep the debt goes, when you are hundreds of thousands in debt what is the point of paying any back, it would hardly make a dent.....all you can then do is stick paying the interest/rent (praying it doesn't increase) or default. ;)

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Me too, but I found the opportunity to borrow an extra 30K at (currently) 2.39% in order to allow my NS&I certs to remain invested at (currently) 6.2% too good a chance to make approx £1,000 of free money per year to miss.

The fly in the ointment is that any of these figures can, and will, change at any moment. And they may not change in your favour.

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The fly in the ointment is that any of these figures can, and will, change at any moment. And they may not change in your favour.

but he/she can pay down the mortgage (in most cases) quickly enough from savings to negate them ,thewre is little risk

it simply came down to getting a good mortgage deal in a prior, different, IR environment, as far as i can tell

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  • 312 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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