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ollie plimsolls

Boe Warns Over Paying Off Debts With Mortgage

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But the report warns that house prices, which have been going up for a decade, could easily fall if the economy takes a downturn, particularly if unemployment or interest rates rise sharply. The authors say: 'The current price of a house may not be a reliable guide to the amount of money that a homeowner could realise if they were to sell their house in the future'.

:o

Oh, but class comments in the replies:

It's easier to put debt onto a mortgage as mortgages are usually paid off within a month according to a Cabinet minister.

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Guest Cletus VanDamme

This is not just idle talk from the BOE. To me it's a declaration that the risk in interest rates is to the upside.

Hmm, if IRs are to go up, why has Smile just cut it's mini Cash ISA rate by 0.5%. Do they know something we don't?

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Because they are a lender, and they will lose money on defaults if IRs go up, or even if they stay static and the market goes quiet. They must get the money back from somewhere. Face it, Cletus - You're payin', bud!

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Hmm, if IRs are to go up, why has Smile just cut it's mini Cash ISA rate by 0.5%. Do they know something we don't?

dunno, why?

maybe their costs have risen

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Hmm, if IRs are to go up, why has Smile just cut it's mini Cash ISA rate by 0.5%. Do they know something we don't?

:rolleyes: because institutions make money on the spread between what they lend at and what the pay depositors in interest.

So the nice bank has just lopped 0.5% of what it pays savers, that doesn't mean that it won't be raising the rate borrowers pay it. Infact they most likely will, why? Because they have to make a profit, and the pool of lenders in total has to make up for the cost to the bank of the small number of defaulters who fail to repay their loans.

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This is not just idle talk from the BOE. To me it's a declaration that the risk in interest rates is to the upside.

Yep! The BOE don't do idle talk. If they're making this point it's to give everyone the heads up.

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Latest warning from the Bank of England-

BoE warning - Daily Mail

Quite a few good quotes and warnings of pain to come for the MEW generation.

ollie

Well it would make more sense to have avoided taking on other debt in the first place but used sensibly MEWing to pay off more expensive debt can make sense if you do it properly.

The fact is lots of supposedly 'unsecured' debt can be quickly changed into secured debt anyway by means of a charging order and this looks set to increase..

Lenders aim to put homes at risk to recover credit card debt

TOUGH new action by the Government and lenders to tackle growing credit card debt will put homes at risk of repossession as companies seek to get their money back.

http://www.timesonline.co.uk/article/0,,2-1840507,00.html

...so if for example you have a 5 year loan of 15k at 8% you could sensibly MEW for 15k so that you are paying only your morgage rate on it eg. 5%. BUT the trick is to make overpayments on your mortgage equivalent to the amount you would have been paying on the unsecured loan. That way you will pay off that 15k in well under the 5 years. Alternatively work out how much you would have to overpay monthly to clear the extra 15k in 5 years which will be a significantly smaller amount than the loan repayments on the 8% loan would have been.

My point is that 'unsecured' debt for home owners can be quickly changed into secured debt anyway - so MEWing can make sense in certain situations and save you money if it is used sensibly and you don't just up your mortgage payments by the amount required to clear the extra debt over your whole mortgage term..

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This is not just idle talk from the BOE. To me it's a declaration that the risk in interest rates is to the upside.

I must agree. "DON'T BLAME US IF INTEREST RATES GO UP AND YOU GO BANKRUPT!" seems to be the message from the BOE.

Billy Shears

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:o

Oh, but class comments in the replies:

It's easier to put debt onto a mortgage as mortgages are usually paid off within a month according to a Cabinet minister.

Yes I believe the chap might have been referring to Ms Jowell. :D Cheeky :D

btp

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Guest struthitsruth

The Daily Mail article refers to the BOE Quarterly Bulletin

http://www.bankofengland.co.uk/publication...etin/qb0601.pdf

The BOE publication discusses survey data collected by NMG Research. 1,923 people were interviewed.

If you look into this publication carefully at page 41 it says

The survey suggests

that a small (but increasing) number of households are

using housing equity as a safety valve: of the one in

eight mortgagors who extended their secured debts over

the past year, a quarter mentioned paying off other

debts as one of the reasons why they took on more

secured debt.

Now that is a slightly different quantity than the Daily Mail journo's line

About a quarter of the people who extended their mortgages last year admitted that the main reason was to pay off other debts'.

Good old Daily Mail, eh ?

:lol::lol::lol:

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The BOE is obviously worried about the trash that it helped create (in the process making billions for the banks) washing back into the housing market and giving lenders an easy target to get their money back.

i) it is a bit late for that.

ii) They seem to have no grip on the scale of debt and that merely telling people not to do it will not make a blind bit of difference.

iii) It makes no odds anyway - the rules have changed, there is effectively no such thing as completely unsecured debt.

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struthitsruth:

QUOTE

The survey suggests

that a small (but increasing) number of households are

using housing equity as a safety valve: of the one in

eight mortgagors who extended their secured debts over

the past year, a quarter mentioned paying off other

debts as one of the reasons why they took on more

secured debt.

Now that is a slightly different quantity than the Daily Mail journo's line

QUOTE

About a quarter of the people who extended their mortgages last year admitted that the main reason was to pay off other debts'.

How is that a different quantity???

Edited by miro2021

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struthitsruth:

QUOTE

The survey suggests

that a small (but increasing) number of households are

using housing equity as a safety valve: of the one in

eight mortgagors who extended their secured debts over

the past year, a quarter mentioned paying off other

debts as one of the reasons why they took on more

secured debt.

Now that is a slightly different quantity than the Daily Mail journo's line

QUOTE

About a quarter of the people who extended their mortgages last year admitted that the main reason was to pay off other debts'.

How is that a different quantity???

I'm no Carol Vorderman, but my understanding is that the survey reports that 1/4 of the 1/8 of mortgagers who extended their secured debts did so to pay off other debts ... i.e. 1/32 of the total number of people surveyed!

The Daily Mail suggests that 1/4 of ALL people surveyed said that this was the reason, which isn't true!

Hope this is right ... I was always better with the letters part of that show!

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Guest struthitsruth

It's a different quantity in the sense that the Daily Mail article omits the words "in the survey"

i.e. it's not a quarter of all people, it's a quarter of the eighth of survey respondents who extended an existing mortgage.

The bulletin actually contains some interesting data, and worth reading. The researchers do point out at the beginning of the section (page 38) where they offer guidance as to how the data is interpreted, that the sample may not be a representative one.

It seems a huge jump to me, for the Daily Mail to say "a quarter of the people who extended their mortgages last year" as it implies a figure based on the whole population.

Nuff semantics then . . . . .

:rolleyes:

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I'm no Carol Vorderman, but my understanding is that the survey reports that 1/4 of the 1/8 of mortgagers who extended their secured debts did so to pay off other debts ... i.e. 1/32 of the total number of people surveyed!

The Daily Mail suggests that 1/4 of ALL people surveyed said that this was the reason, which isn't true!

Hope this is right ... I was always better with the letters part of that show!

Depends on which way you read it:

My take on it is:

One in Eight people extended their mortgages (i.e. 1/8 were MEW; the remaining 7/8 were buying new or transferring existing mortgages to a new lender)

Of this 1/8 (i.e. the MEW part), 25% were doing so to pay off other debts.

Sorry, but the Daily Mail is entirely correct............ :)

Edit: Too slow in typing, struthitsruth beat me to it!

Edited by Control Freak

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I'm no Carol Vorderman, but my understanding is that the survey reports that 1/4 of the 1/8 of mortgagers who extended their secured debts did so to pay off other debts ... i.e. 1/32 of the total number of people surveyed!

The Daily Mail suggests that 1/4 of ALL people surveyed said that this was the reason, which isn't true!

Hope this is right ... I was always better with the letters part of that show!

LOL

About a quarter of the people who extended their mortgages last year admitted that the main reason was to pay off other debts'

So the Daily Mail is NOT suggesting that a quarter of ALL people gave the debt reason they're saying a quarter of people who extend their mortgage (which we happen to know is 1/8 from the other report) gave the debt reason.

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Guest struthitsruth

(which we happen to know is 1/8 from the other report)

Cheers, you consolidate my point - that you need to know the source to assess the quantity.

;)

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However, the Daily Mail have given prominence to the "Quarter" - aka 25% aspect, while the projected % (based on the sample) is about 3% (i.e. a quarter of an eighth)

And, as qualified, not necessarily large enough to be a representative sample.

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However, the Daily Mail have given prominence to the "Quarter" - aka 25% aspect, while the projected % (based on the sample) is about 3% (i.e. a quarter of an eighth)

And, as qualified, not necessarily large enough to be a representative sample.

However,

That 3% is significant in comparison to the 12.5% of the MEW total, is it not?

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  • 301 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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