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Consumer Debt Level Beats Uk Output

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http://www.telegraph.co.uk/money/main.jhtm.../ixcitytop.html

Debts taken on by British families have overtaken the size of the economy for the first time.

People have borrowed so much their total debt outstripped Britain's gross domestic product over the new year.

The landmark came barely 18 months after British household debt passed £1 trillion, and came as bankruptcies have soared to record levels.

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Guest Riser
However, analysts were reassured that the vast majority of household debt was tied up in mortgages, rather than unsecured debt.

Oh well thats all right then because house prices only ever go up so will always cover the amount owed on a mortgage. The negative equity of the early 90s was just a scare story cooked up by doom mongers then :rolleyes:

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I'm not suprised, if you also add in government debt and liabilities such as unfunded pensions, off balance sheet financing, PFI/PPI deals; you get the grand sum of over £1.3 trillion in the public sector alone. If you add in consumer debt and company debt (the bond market) you can quite easily get to four times annual GDP, nice.

leverage.jpg

Edited by BuyingBear

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However, analysts were reassured that the vast majority of household debt was tied up in mortgages, rather than unsecured debt.

As usual the fact that a significant amount of this debt started off as unsecured credit card, car loan etc debt is ignored.

That's the main thing that's keeping the economy afloat. Many people are now periodically rolling 3 and 5 year short term debts into their much longer term mortgages. Unfortunately this could go on for a long time before the severe consequences are felt. At this rate by the time Gordon Brown next goes to the polls consumers will have taken on an extra £1 trillion in debt during Labour's period in office. I can see the Tory posters now.

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As usual the fact that a significant amount of this debt started off as unsecured credit card, car loan etc debt is ignored.

Indeed, we've seen how lenders now queue up to apply for charges on property to secure previously unsecured debt.

Loans Sharks direct and their ilk don't care about proof of income for exactly the same reason, they nab peoples' house keys off them without them even noticing.

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Frightening.... surely people should realise that this position is unsustainable??

Do people not think anymore?

This is all getting a little too 1984 for my liking.

Read the Times yesterday and every story seemed to be pseudo-propoganda for forthcoming blairite initiatives... buttering the people up for what is coming next. :ph34r::ph34r:

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What's really scary is the 10.2% pa INCREASE. How can anyone see this as sustainable? It's pretty obvious people are borrowing more to cover the debt servicing, which can only be a recipe for a vicious downward spiral.

OTOH for peeps like me this is good news...probably.

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This is not good news for anybody, I don't want to live in a society that's broke. I don't want to be surrounded by hardship, stress, crime and the suffering that results from poverty, even if it is self-induced by most. We as a society are slowly being cooked by the banks, by government, big business and most of all by our own ignorance! :angry:

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Foobar

Seems like a lot of older generation do, I reckon they will be unhappy with the results, their property pile won't prosper, neither will their children and they are likely to be surreounded by an ever more hostile general environment.

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This is not good news for anybody, I don't want to live in a society that's broke. I don't want to be surrounded by hardship, stress, crime and the suffering that results from poverty, even if it is self-induced by most. We as a society are slowly being cooked by the banks, by government, big business and most of all by our own ignorance! :angry:

Viva La Revolution :o

Will there come a time when the government / banks / rich push their luck a little too far and the Uk faces a revolt??

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Guest Charlie The Tramp

What's really scary is the 10.2% pa INCREASE. How can anyone see this as sustainable? It's pretty obvious people are borrowing more to cover the debt servicing, which can only be a recipe for a vicious downward spiral.

Even in the current benign economic environment, the Financial Services Authority (FSA) are seeing signs of growing distress among consumers, including more insolvencies, more late payments on credit cards and a rise in mortgage repossession orders. Their consumer research shows that many consumers with significant borrowing commitments are currently struggling to keep up with repayments. They say it is important that, before taking on new debt, consumers assess their ability to service it, especially if their circumstances change unexpectedly.

Levels of secured debt reached 117% of household disposable income at the end of the second quarter of 2005, while unsecured debt totalled 24%.

Slowly but surely the big bang is drawing closer.

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What's really scary is the 10.2% pa INCREASE. How can anyone see this as sustainable?

And the economy is growing below 2% pa, such a high degree of leverage and such poor performance. It seems the growth in debt and income isn't going into underlying growth but is simply being used to stoke up the previously accumulated debt pile.

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Indeed, we've seen how lenders now queue up to apply for charges on property to secure previously unsecured debt.

Loans Sharks direct and their ilk don't care about proof of income for exactly the same reason, they nab peoples' house keys off them without them even noticing.

I saw an ad recently that basically said "If you have the right to buy we'll lend you what you need to buy the council house you're in and a bit on top" which is taking loans marketing yet further.

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So as a nation we owe more than we earn in one year.

Here's a very rough calculation/idea for you:

If we compare the nation to the individual and the individual would typically take out a mortgage of 3.5 times salary to pay back over 25 years (if you're a shrewd HPC reader) then our national debt as it stands now (~1 times salary/gdp), would take approx 7-8 years to pay back. Humour me here. Then look at this excellent graph Bandwagon posted a while ago:

http://www.housepricecrash.co.uk/forum/ind...pe=post&id=2275

Again with my rough/dodgy calculating skills I looked at this graph and noticed the low/high/low cycles are fairly symmetrical. So I deduced the bottom of the market on this basis for the current cycle is about 8 years away, this compares to the figure above for how long we need as a nation to pay our current debt off.

Any thoughts? (other than what the crap are you talking about?!) :rolleyes:

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Who MEW?

That's the main thing that's keeping the economy afloat. Many people are now periodically rolling 3 and 5 year short term debts into their much longer term mortgages. [seenItAllBefore]

They were, but look what's happened to 'MEW as a Percentage of Post-Tax Income':

http://www.graphicinvestor.com/econo/UK/MO.../05Q3MEWpct.gif

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  • 302 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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