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workingpoor

Middle Class Debt Meltdown

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The false sense of security caused by rising house prices might also be masking the problem as many find themselves unable to access enough equity in their homes to meet the shortfall because they have already increased their mortgages to the maximum.

With fewer home loan products available, options for remortgaging have also dwindled. Even unsecured debts can lead to lenders taking a legal charge on a home.

Read more: http://www.thisismoney.co.uk/money/news/article-2484572/Toll-wealthy-professionals-financial-trouble-rockets-quarter-years.html#ixzz2jc6YCXec

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I have a few pension pots from previous employers. Two have recently sent, with the annual statement, a warning not to go for `early release of pension' scams. I conclude that they are being asked by people younger than 55 if they can get to any of the money in the pension pot (the answer is "no"). That, to me, looks like quite a lot of people who in the past have had the means to contribute to pension schemes are now in need of cash.

Perhaps a combination of kids at uni, frozen or falling salaries and rising cost of living. Higher mortgage rates would be a real killer. Also, until 2010 you could access pension money at aged 50 - so perhaps quite a few had budgeted for a bit of income from that until Labour changed the rules (why?).

Y

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From the comments - " Describing people in financial trouble as being wealthy is somewhat confusing as they are clearly far from being wealthy. Debt and debtors have gone nowhere as I have long said would be the case as they are little different to drug addicts dependant on their next fix." - says it all really. The sooner it blows up the better IMO, let`s get back to REALITY.

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The false sense of security caused by rising house prices might also be masking the problem as many find themselves unable to access enough equity in their homes to meet the shortfall because they have already increased their mortgages to the maximum.

With fewer home loan products available, options for remortgaging have also dwindled. Even unsecured debts can lead to lenders taking a legal charge on a home.

Read more: http://www.thisismoney.co.uk/money/news/article-2484572/Toll-wealthy-professionals-financial-trouble-rockets-quarter-years.html#ixzz2jc6YCXec

are prices rising? i thought they were still falling in real terms and static in nominal terms.

asking prices and mortgage offers going up...reality does not match this b.s.

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are prices rising? i thought they were still falling in real terms and static in nominal terms.

asking prices and mortgage offers going up...reality does not match this b.s.

I think that quote is saying that they were relying on HPI in the past and now it's not there for them to MEW to clear built up debts it also goes on to say annual bonuses are disappearing which have traditionally been used in the past to clear debts also.

it's a 'games up' type article for HPI worshippers

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The sooner it blows up the better IMO, let`s get back to REALITY.

Who needs reality when you've got QE? The carney man will simply print us out of trouble if it comes to that.

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Nice picture from "The Money Pit" to accompany the article, a film many would do well to watch.

Is this simply a margin call finally coming in on those who could never make ends meet without HPI?

Clearly, a leveraged speculator can face a margin call, and if I might be so bold as to presume, you would agree with me that regardless of what these people who took out big mortgages and MEWed thought they were doing, they were in reality placing a leveraged bet on house prices.

However, I think that this analysis would be alien and incomprehensible to these "affluent" people who can't pay their credit cards.

I wonder what it might look like if they all tried quit whilst they were ahead and cash out of the property market at the same time?

It is my conviction that the UK cannot avoid a house price correction. The present plan of holding down rates just means that these clowns bleed to death slowly rather than having a short sharp shock. The actual causal events were all in place by 2004. All the rest is "by the way...".

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With fewer home loan products available, options for remortgaging have also dwindled. Even unsecured debts can lead to lenders taking a legal charge on a home.

FT of 25 October 2013 suggested that even though HTB2 also has the facility to allow banks to do remortgaging/refinancing for existing owners, there doesn't seem to be any appetite by the lenders to move forward on this element of it.

With many owners who would want it said to be trapped on higher SVRs and little equity. Although RBS said to be looking at bringing it in later in the year, which I hope is only a 'sustaining hope' comment.

Help to Buy offers no release to UK’s mortgage ‘prisoners’

“At present lenders have chosen not to offer remortgage ‘Help to Buy’ schemes. I feel it is highly unlikely that lenders will rush to extend it to assist with remortgaging in the near future,” said Nigel Bedford of Largemortgageloans.com.

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FT of 25 October 2013 suggested that even though HTB2 also has the facility to allow banks to do remortgaging/refinancing for existing owners, there doesn't seem to be any appetite by the lenders to move forward on this element of it.

With many owners who would want it said to be trapped on higher SVRs and little equity. Although RBS said to be looking at bringing it in later in the year, which I hope is only a 'sustaining hope' comment.

I think one of th reasons behind rushing foward HTB2 was for remortgaging purposes although maybe not directly through HTB the idea is to generate some HPI quickly (wether genuine HPI or percieved) so that the over leveraged can get some MEW going to clear built up debts before they get overcome by it. Xmas is traditionally the time for annual bonuses to be paid out and as they're on the way out (as mentioned in article) clearing the years built up debts isn't going to be so easy as in the past so MEW is needed for this purpose?

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Yeah, I don't know why they'd want to make it easier for people to re-mortgage. They have them exactly where they want them - handing over as much of their hard earned as possible in exchange for generally damp and cold pile of bricks.

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I was pretty amazed when we were talking about Royal Mail shares at work and who was going for them and several reasonably well-paid people in their 30s and 40s joked about whether they could buy them with their debts.

Did this idea of living in debt when you don't have to (unlike having to as you're genuinely skint because of low or erratic wages) start in the 90s? This is clearly debts on top of mortgage, which is itself a debt of course but usually a pretty unavoidable one.

The pensions withdrawal bit is fairly telling, also news to me that it had upped from 50 to 55 before you could take it. Not that I intend doing so.

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Surely it doesn't matter what a house is worth while you are living in it.....value may be important only if you want to extract more debt from it for its presumed so called 'value'........but debt still has to be repaid not just serviced......true wealth is assets minus debt...so by taking on most types of debt only makes you less well off both in net worth and extra costs incurred......can also mean you are stuck living in a place you may not want to be unable to move, so can tie you down.....fewer choices and freedoms. ;)

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I was pretty amazed when we were talking about Royal Mail shares at work and who was going for them and several reasonably well-paid people in their 30s and 40s joked about whether they could buy them with their debts.

Did this idea of living in debt when you don't have to (unlike having to as you're genuinely skint because of low or erratic wages) start in the 90s? This is clearly debts on top of mortgage, which is itself a debt of course but usually a pretty unavoidable one.

The pensions withdrawal bit is fairly telling, also news to me that it had upped from 50 to 55 before you could take it. Not that I intend doing so.

It's a symptom of the general squeeze on the middle class. The 'standard' setup - detached house, 2 cars, 2 kids, annual holiday - just gets more and more expensive relative to real wages. But alongside, we have a whole credit industry set up to allow you to live a bit beyond your means for years at a time, if not decades.

Hell, I worked out that I could have spend perhaps £7k a year more than I did every year for the past decade and I'd still be able to maintain the appearance of solvency, and of course I'd *appear* far more 'successful'.

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<snip>Did this idea of living in debt when you don't have to (unlike having to as you're genuinely skint because of low or erratic wages) start in the 90s? This is clearly debts on top of mortgage, which is itself a debt of course but usually a pretty unavoidable one.<snip>

At least the early to mid 80s. I remember being in the pub with a group of people companng what they owed as unsecured debts - bank loans, overdrafts, credit cards. After listening to this, I wondered why I was fretting over my £150 overdraft. Most of them owed thousands - people in work but not spectacularly well paid jobs.

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From the comments - " Describing people in financial trouble as being wealthy is somewhat confusing as they are clearly far from being wealthy. Debt and debtors have gone nowhere as I have long said would be the case as they are little different to drug addicts dependant on their next fix." - says it all really. The sooner it blows up the better IMO, let`s get back to REALITY.

However there are lots of wealthy people with debt and leverage. The LTCM guys where extremely wealthy and loaded with leverage debt. When prices remained positive they were amongst the uber rich, when they failed they just got to remain rich....

The proles are just copying their masters but the masters get to play by different rules which means they don't get wiped out.

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It's a symptom of the general squeeze on the middle class. The 'standard' setup - detached house, 2 cars, 2 kids, annual holiday - just gets more and more expensive relative to real wages. But alongside, we have a whole credit industry set up to allow you to live a bit beyond your means for years at a time, if not decades.

Hell, I worked out that I could have spend perhaps £7k a year more than I did every year for the past decade and I'd still be able to maintain the appearance of solvency, and of course I'd *appear* far more 'successful'.

If you can keep servicing the debt then it could easily have been decades, and perversely if you can service the debt you can afford to live like this it's when the debt servicing stops it suddenly becomes a problem.

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If you can keep servicing the debt then it could easily have been decades, and perversely if you can service the debt you can afford to live like this it's when the debt servicing stops it suddenly becomes a problem.

Or when you hit 50 and suddenly realize that you've got 15 years max to retire all your debt and get a pension, just as your earning power starts to decline.

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Or when you hit 50 and suddenly realize that you've got 15 years max to retire all your debt and get a pension, just as your earning power starts to decline.

So you just 'buy' a couple of properties to rent out and cash in the HPI.

Far easier than working for it.

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At least the early to mid 80s. I remember being in the pub with a group of people companng what they owed as unsecured debts - bank loans, overdrafts, credit cards. After listening to this, I wondered why I was fretting over my £150 overdraft. Most of them owed thousands - people in work but not spectacularly well paid jobs.

Wow, I was working very late eighties and most were very keen to clear their (relatively) small final year student debt. There was the odd person with an uncleared credit card balance and one who went on fantatsic holidays on tick on the grounds that now was the time to enjoy them and he could pay later (fair enough, it was an informed decision) but they were the minority.

I sometimes watch these BBC3 programmes where people go out shopping for stuff they don't need (and might not even open) to add to their big debts but they tend to be people in their 20s who haven't started taking financial responsibility because their parents are still in the background to bail them out. They're clearly more common than I thought and can be alot older than 20s.

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It's a symptom of the general squeeze on the middle class. The 'standard' setup - detached house, 2 cars, 2 kids, annual holiday - just gets more and more expensive relative to real wages. But alongside, we have a whole credit industry set up to allow you to live a bit beyond your means for years at a time, if not decades.

Hell, I worked out that I could have spend perhaps £7k a year more than I did every year for the past decade and I'd still be able to maintain the appearance of solvency, and of course I'd *appear* far more 'successful'.

I like this post. For years I have been leading a sort of economy life, saving up for stuff before I bought and making sure that my outgoings are less than my income. I have about £50k in various investments, plus my company pension and about £120K of property now mortgage free.

I could with very little effort, mortgage my property take out a hefty personnel loan and rack up some credit on the visa and within a matter of weeks have around £80 to £100K at my disposal to spend on fast cars, women and booze. It would be very easy to create the illusion that I am successful and wealthy whilst secretly spending the next 10 years juggling the repayments.

It is very easy to live beyond are means with the easy credit available but I prefer to carry on just as I am for the near future.

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Credit works just like a drug, people get high on it and suffer from withdrawal when it is not available.

The banks pushed their product, making many dependent on its reality altering effects. The switch back to normality has proved too much for many to contemplate.

The credit crunch caused the old dealers to split, this left our Governments with the only option of becoming the new pushers or lose all their junkie voters.

Quantitative easing is the drug of the masses.

Edited by Lord D'arcy Pew

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Debts eventually catch up with you, some people I know live on credit always looking to buy a new car or weekend toy but on lemonade wages, they've managed to hold it all together up until now but they must be feeling it, I've seen some embark down the self-employed route but keep quiet about the tax credit income making out everything's going well, a real success.

It really is about keeping up with the jones's and maintaining the facade.

Here's to the rinse

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I sometimes watch these BBC3 programmes where people go out shopping for stuff they don't need (and might not even open) to add to their big debts but they tend to be people in their 20s who haven't started taking financial responsibility because their parents are still in the background to bail them out. They're clearly more common than I thought and can be alot older than 20s.

Daughter has a friend who was constantly in £30K-ish cc debt, into her 30s. she went round once because friend was depressed about the debt - only to find she'd just been shopping for a load of stuff she didn't need. So she said, come on, let's take all this back now, you can get refunds.

'But I bought it all to cheer myself up!'

Shouldn't laugh, but oh, dear... This girl had been bailed out endlessly by family when she was younger. Parents like that want shooting IMO. I would do it once, but only on the understanding that it was a one off, and I could personally cut up the credit cards. The girl had never been out of a reasonably paid job - it wasn't a case of genuine need, just endless clothes, shoes, make up etc.

Edited by Mrs Bear

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are prices rising? i thought they were still falling in real terms and static in nominal terms.

asking prices and mortgage offers going up...reality does not match this b.s.

Sale prices have gone virtually nowhere since 2004 in vast swathes of the country outside the M25.

Clearly, a leveraged speculator can face a margin call, and if I might be so bold as to presume, you would agree with me that regardless of what these people who took out big mortgages and MEWed thought they were doing, they were in reality placing a leveraged bet on house prices.

However, I think that this analysis would be alien and incomprehensible to these "affluent" people who can't pay their credit cards.

I wonder what it might look like if they all tried quit whilst they were ahead and cash out of the property market at the same time?

It is my conviction that the UK cannot avoid a house price correction. The present plan of holding down rates just means that these clowns bleed to death slowly rather than having a short sharp shock. The actual causal events were all in place by 2004. All the rest is "by the way...".

This.It's unavoidable.

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