Consumer Debt, Its Falling

[Economic Sensation]

Looks like consumer debt is falling back again, which should alleviate the concerns for some worriers on the site

http://go.reuters.co.uk/newsArticle.jhtml?...alog/GetContent

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

It shows that people are concerned about the debt that they ran up and it seems that now people are paying it off and holding back on their spending, possibly because house prices have been easing a little. Lower consumer spending means lower growth, which means lower interest rates and support for house prices.

ES

[schadenfreude]

Tell that to the Japanese. When their growth hit the rocks, interest rates fell (to the point where they were negative) and yet property slumped and lost 90% of its value - and all this on an island where space is at a premium.....

Edited September 30, 2005 by schadenfreude

[bob monkhouse]

Looks like consumer debt is falling back again, which should alleviate the concerns for some worriers on the site

http://go.reuters.co.uk/newsArticle.jhtml?...alog/GetContent

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

It shows that people are concerned about the debt that they ran up and it seems that now people are paying it off and holding back on their spending, possibly because house prices have been easing a little. Lower consumer spending means lower growth, which means lower interest rates and support for house prices.

ES

Excellent news for once

[bears all]

Lower consumer spending means lower growth, which means lower interest rates and support for house prices.

ES

Well, up to a point. Put it another way - Lower consumer spending means lower growth which means redundancies which means bankruptcies and falling confidence which both undercut house prices.

[AteMoose]

Looks like consumer debt is falling back again, which should alleviate the concerns for some worriers on the site

http://go.reuters.co.uk/newsArticle.jhtml?...alog/GetContent

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

It shows that people are concerned about the debt that they ran up and it seems that now people are paying it off and holding back on their spending, possibly because house prices have been easing a little. Lower consumer spending means lower growth, which means lower interest rates and support for house prices.

ES

let me get this right, people arent borrowing as much this year as last, BUT this doesnt mean debt is falling, its just rising half as fast as it was last year!

http://www.creditaction.org.uk/debtstats.htm

Total UK personal debt broke through the £1.1 trillion barrier (£1,100,000,000,000) in June 2005

and according to reuters it is now going up my 9.37 BILLION a quarter, it was going up at double that!!!! ie last quarter debt only went up by £9,370,000,000, to me that is a crazy defination of debt falling back!!!! Debt only falls back when this drops to £0, or starts being paid off, (ie negative)

Edited September 30, 2005 by moosetea

[apom]

of course if house prices remained at current levels.. then debt levels would have to rocket..

because if houses costs lots and lots.. this can only be if people pay lots and lots for them...

and if people pay lots and lots for them... then they have to borrow lots and lots..

So house prices can stay at current levels..

But to do so .. an awful lot of people need to come into the market..

all of which need to be borrowing lots and lots... and

well its all about lots of people borrowing lots and lots of money.

or lower house prices..

So Economic sensation..

house prices can stay this high providing no one actually buys them..

is that cool?

[ThePiltdownMan]

It doesn't make sense to me.

If someone saves £1 and someone borrows 69p or 27p then the net effect is still a saving.

[Guest Charlie The Tramp]

let me get this right, people arent borrowing as much this year as last, BUT this doesnt mean debt is falling, its just rising half as fast as it was last year!

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.

Instead of increasing by 1 million every four minutes is now down to 950k.

[apom]

I mean to see a drop of in house sales and to say that people are borrowing less.

If house prices stay where they are.

Then the debt levels required to maintain this would bankrupt the country..

Do you agree?

Does anyone disagree...?

where would all this money come from.. ? I am intrigued..

what would you expect debt levels to be in three years..

the market requires a lot of it to be FTB's in an normal healthy market..

thats an awful lot of debt..

1 million every 4 minutes is

£131,400,000,000 a year..

at the peak...

That can't be right...

can it...?

Can someone tell me my maths are rubbish...?

[IPOD]

Lower consumer spending means lower growth, which means lower interest rates

The MPC is mandated to target inflation, not growth.

[Biriani]

Some bulls seem to think that if the economy starts to suffer and the Bank of England is forced to cut interest rates, that will somehow be good for the housing market.

It won’t be.

The housing market runs on more than just interest rates – the main drivers are sentiment and the underlying state of the economy.

Sadly, the British economy is currently dependent on debt to keep it going. Debt creation has been at an all time high recently, but still the economy hasn’t really been racing.

If consumer borrowing drops and everyone starts saving instead, then they’re spending less money in the economy. That means businesses will find it even harder, and job losses will soon follow. A full-blown recession is a real possibility.

And if people lose their jobs and are afraid taking out debt, do you then think it will make any difference to the housing market if the BoE cuts interest rates?

As has been pointed out, Japanese interest rates have been zero for much of the past decade (negative in real terms!) and this hasn’t exactly stimulated their property market.

Only the most naïve of bulls cheer when there is bad news about the economy which they believe might translate into interest rate cuts. Wake up and see the forest – stop looking at the trees!

[London-loser]

Looks like consumer debt is falling back again, which should alleviate the concerns for some worriers on the site

http://go.reuters.co.uk/newsArticle.jhtml?...alog/GetContent

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

It shows that people are concerned about the debt that they ran up and it seems that now people are paying it off and holding back on their spending, possibly because house prices have been easing a little. Lower consumer spending means lower growth, which means lower interest rates and support for house prices.

ES

I believe last month was the second time this year that people repaid net credit card debt (there were more repayments than borrowings on credit cards). I believe April 2005 was the first time this had happened for 11 years.

This would indeed provide some evidence to suggest UK consumers are concerned about their debt levels and look like they are retrenching and starting to repay debt rather than run up new debt.

On the plus side this does point to people starting to get to grips with the issue of a large amount of debt.

The rest of your conclusions from this seem a little odd though - consumers concerned about debt and saving/repaying debt rather than spending, to me, is a worrying thing for the UK's massively overpriced housing market.

I think it is the right thing for people to do and it is good for our economy long term (we cannot fund an economy on debt long term and the earlier the reckoning the less the problem) but it does not bode well short-term and is potentially very bad news for sellers with overpriced properties.

Only the most naïve of bulls cheer when there is bad news about the economy which they believe might translate into interest rate cuts. Wake up and see the forest – stop looking at the trees!

Indeed. The long bull run came on the back of an extended period of economic growth (Gordon Brown's boasts it is the longest since records began). People seem to have extrapolated this out to "strong economic growth forever" and priced houses accordingly.

They have become so brainwashed that they seem to believe house prices march on regardless of what the economy does. I still believe UK property to be a "supercyclical" - a VERY good investment in periods of strong economic growth but VERY bad in periods of recession/economic weakness (especially if started from overblown prices too).

Edited September 30, 2005 by London-loser

[eric pebble]

Tell that to the Japanese. When their growth hit the rocks, interest rates fell (to the point where they were negative) and yet property slumped and lost 90% of its value - and all this on an island where space is at a premium.....

Well Said Schadenfreude: "Economic Sensation" is from Mars.......

[Guest Charlie The Tramp]

Did I not read somewhere that mortgage arrears were on the way up.

Any links?

[erranta]

With unemployment rising for the past 10 odd months (you just can't believe those Government calculations) due to companies offloading shedloads of jobs I would have thought many more are sliding further into the quagmire.

Rover closure alone must have dented that part of the Midlands significantly.

Shame we don't often see results on how many are far behind on payments?

What are the real (hidden) statistics??

[Michael]

Of course debt isn't going to go on rising indefinitely!.............and with an uncertain economic backdrop people will reduce their debts if they can.............the problem is our current public finances and economy generally are based on high debt-fueled consumer spending............and NOT strong fundamentals

[E Powell]

Debt is going down because people are selling their

Bling Mans Wheels.

So their 100k is down to 99.5k

[Guest Time 2 raise Interest Rates]

Consumer debt falling and mortgage repayments rise.

The research was based on 1.3 million account-holders with the Barclays Group.

THE MORTGAGE BURDEN % of earnings spent on mortgage

2002 2003 2004 2005

Hackney South

& Shoreditch 26.5 27.8 28.1 32.8

Brent East 24.5 26.8 28.5 30.8

Vauxhall 27.7 26.3 28.6 30.6

Poplar &

Canning Town 28.1 27.4 28.6 29.0

Brent South 22.7 24.6 27.5 28.6

Wimbledon 18.7 19.4 19.1 20.0

Romford 15.8 16.2 18.2 18.9

Croydon South 17.6 17.2 19.8 19.5

Edited September 30, 2005 by Time 2 raise Interest Rates

[OnlyMe]

Figures compiled from official data by IFA Promotion showed personal borrowing (excluding mortgages) tumbled to 9.37 billion pounds in the second quarter of 2005, down 17 percent on the previous quarter and 52 percent on the same period last year.

At the same time, Britons put more aside than at any time in the last four years, saving 35.33 billion pounds during the same three months.

What a lot of rot and misinformation, notice the bit "excluding mortgages".

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

Rubbish. Net off the extra mortgage debt - many people are shifting from unsecured to secured debt (at a lower rate) but now the house is collateral.

[Dames]

Figures compiled from official data by IFA Promotion showed personal borrowing (excluding mortgages) tumbled to 9.37 billion pounds in the second quarter of 2005, down 17 percent on the previous quarter and 52 percent on the same period last year.

At the same time, Britons put more aside than at any time in the last four years, saving 35.33 billion pounds during the same three months.

What a lot of rot and misinformation, notice the bit "excluding mortgages".

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

Rubbish. Net off the extra mortgage debt - many people are shifting from unsecured to secured debt (at a lower rate) but now the house is collateral.

Agree , I't's more not spending than 'real' saving and probably explains the rise in mortgage applications.

There's probably a lot on min payments at the mo hanging on a thread.

D

[dog]

Looks like consumer debt is falling back again, which should alleviate the concerns for some worriers on the site

http://go.reuters.co.uk/newsArticle.jhtml?...alog/GetContent

"For every pound saved during the quarter, Britons borrowed just 27 pence, compared to 69 pence a year ago".

It shows that people are concerned about the debt that they ran up and it seems that now people are paying it off and holding back on their spending, possibly because house prices have been easing a little. Lower consumer spending means lower growth, which means lower interest rates and support for house prices.

ES

I suppose you are hoping that this will save your bacon (if you have paid too much for your house/houses). I would not hold your breath. The problem lies not with the people who repay their debts but the ones who cannot. Sadly there is a huge number of people in the latter category. On radio 4 (very early yesterday) they made a brief mention of large numbers of people living in homes they could not afford.

[rockdoctor]

If you declare bankrupt doesn't your debt get written off?

Maybe we will see a very healthy level of debt once the coming recession has done its job?

[crash 2005]

It's irrelevant that consumer debt is falling, cos we are entering the season where people spend the most

XMAS!

[dog]

It's irrelevant that consumer debt is falling, cos we are entering the season where people spend the most

XMAS!

http://www.sky.com/skynews/article/0,,3040...8,00.html?f=rss