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Mortgage Debt To Hit £1 Trillion

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http://money.guardian.co.uk/property/mortg...1762709,00.html

I love stuff like this...

"But despite the amount consumers owe on their home loans breaching the 13-figure mark, the group said the debt was dwarfed by the equity contained in property."

And I'm guessing here that the "equity" is based on absurd over-valuations and a massive price bubble, whereas the debt is based in cold, hard, unpleasant reality.

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And I'm guessing here that the "equity" is based on absurd over-valuations and a massive price bubble, whereas the debt is based in cold, hard, unpleasant reality.

The formula for "Equity" on a house is simply :-

"What people THINK a house is worth" MINUS "how much mortgage debt the owner is in"

Should the former change, then equity will simply disappear. Equity is just some imaginary concept based on perceived values of houses. It isn't actually real.

It's crazy !

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And I'm guessing here that the "equity" is based on absurd over-valuations and a massive price bubble, whereas the debt is based in cold, hard, unpleasant reality.

Spot on. Equity can evaporate. Debt doesn't. And the only way to realise the equity in your house is to sell it. The implication is that everyone has loads of equity. That may well be the case but there's no way that everyone will be able to realise their profit because there isn't enough money outside property to buy the equity that exists within property from its current owners. There will soon come a point where every last drop of money that can go into property has done so, and the only people left will be those who don't have guarantors, parents who can help them, the stupidity to borrow 10x salary on IO, the even greater stupidity to 'lie to buy', and when that moment arives it'll be crunch time.

The formula for "Equity" on a house is simply :-

"What people THINK a house is worth" MINUS "how much mortgage debt the owner is in"

Yeah, it looks a bit like this...

Fiction – Fact = Equity

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a trillion pounds is about £16.5k per man woman and child in the Uk.........This is a lot when you consider half the population is economically inactive.......and the debt isn't evenly spread between those who ARE active................it's massively skewed onto people in their 20s and 30s....

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But, of course, debt can evaporate.

How does that work, then ? Since you imply that debt can disappear overnight.

And if you hadn't noticed lately, the mortgage markets are pricing in higher interest rates all round.

Edited by Warwickshire Lad

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But, of course, debt can evaporate. Or at least become cheaper to service and therefore easier to repay when interest rates fall.

You take a very one-sided view on here.

Unfortunately for those who dont realise though it 'evaporates' very slowly with low inflation.

Inflation according to GB/BoE is 1.8% ( cpi ) , long run is around 4.5% ( I stand to br corrected - just trying to illustrate the effect ).

If you borrow £100,000 now , in 10 years time in todays money that debt would be worth ( still to be repaid ).

Inflation @ 1.8% = £83,000 ish

Inflation @ 4.5% = £64,000 ish

D

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By the magic of inflation.

Yes I knew that :rolleyes: but today's FTBs aren't going to get hefty pay increases like the baby boomers due to a lack of Unionism and cheap foreign workers.

As soon as wage inflation appears higher than normal then IRs go up and mortgage payments go up.

That's Bank of England policy, so no-one can tell me that inflation is going to evaporate debt like it used to.

Sooner or later the penny will drop for today's overextended mortgage slaves.

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But, of course, debt can evaporate. Or at least become cheaper to service and therefore easier to repay when interest rates fall.

You take a very one-sided view on here.

Point taken. I hadn't considered that fully.

Which leads me to wonder which one is least "concrete" - the "equity" or the "debt"?

Opinions/facts on this?

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But, of course, debt can evaporate. Or at least become cheaper to service and therefore easier to repay when interest rates fall.

You take a very one-sided view on here.

Debt can only evaporate through IVA or bankruptcy.

Wage inflation might make the debt seem a little smaller over time, but then wage deflation due to globalisation and insecure jobs is more likely than wage inflation for most people.

I stick with the view FICTION - FACT = EQUITY.... that seems to sum it up nicely.

The 'price' or 'value' of a house can change quite quickly (admittedly up as well as down) but the debt won't usually be cleared very quickly.

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I stick with the view FICTION - FACT = EQUITY.... that seems to sum it up nicely.

I would be more inclined to say OPINION - FACT = EQUITY. But each to their own...

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surely the debt has interest being incurred at a higher rate than inflation? and as such condensates into further debt rather than evaporates?

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Couldn't agree more about the pain that low inflation will cause the economy on the medium to long term.

Unfortunately it will hit households randomly over a 20 year period depending on when the mortgage was taken out. In itself it will not cause enough pain to create a house price crash. Just a much slower than normal economic growth - bad news for anyone retiring in 40 - 50 years.

I met some of our new neighbours last night. One had been there 41 years, the other 22. So, unless they've been MEWing for Britain no mortgage debt problems there. Their children and grandchildren may not have the same luxury though.

Our household debt averages £90K for every man woman and child. Although we will reduce to 75K average by the end of this week.

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Debt cannot evaporate. [period]

The cost of servicing debt can be reduced or increased (depending on T&C).

Debt can be written off in the case of bankruptcy, but usually only after asset sales.

Not good for creditors.

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But, of course, debt can evaporate.

This is the funniest thing I have read in years.

I'm off to rack 10+ credit cards up to a minimum of about £85k? No problem, it can 'evaporate'.

This guy IS an estate agent, duh.

I'm really getting worried about the (very near) future of Great Britain PLC with muppets like this. He/She is taking an interest in the economy!!!!!!!!!!! The rest are clueless which is the real worry.

We are fcuked.

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"But despite the amount consumers owe on their home loans breaching the 13-figure mark, the group said the debt was dwarfed by the equity contained in property."

"But despite the amount consumers owe on their home loans breaching the 13-figure mark, the group said the debt was dwarfed by the equity contained in the 'lower generations future wages'."

(of which they spied and licked their lips. almost salavating with desire...)

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http://money.guardian.co.uk/property/mortg...1762709,00.html

I love stuff like this...

"But despite the amount consumers owe on their home loans breaching the 13-figure mark, the group said the debt was dwarfed by the equity contained in property."

And I'm guessing here that the "equity" is based on absurd over-valuations and a massive price bubble, whereas the debt is based in cold, hard, unpleasant reality.

and the last trillionaire looked at the wealth of the country held in his hand..

complete desolation surrounded him...

Hungry he lifted his fortune.. all the fortunes... smiling he drew his partched tongue over the brick.. desperate for sustenance... finding none he scowled.. but just for a moment..

he looked at everything... he owned everything..

the last..

the last brick..

Then he died..

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But, of course, debt can evaporate. Or at least become cheaper to service and therefore easier to repay when interest rates fall.

You take a very one-sided view on here.

Hi, This is how it works.

1.Houses are only 'worth' what the banks will lend your average punter to buy them with.

2.Nothing has changed except the price of money, not houses.

3.There will come a time when the price of money goes up, no one can predict it.

When this happens the magical equity the delusional speak of will suddenly vanish as quick as it appeared and 1. will continue to remain a fact.

Edited by dom

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just got a leaflet offering to buy my home and rent it back to me. was all about mortgage areas. is this the sign of healthy borrowing?

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But, of course, debt can evaporate. Or at least become cheaper to service and therefore easier to repay when interest rates fall.

You take a very one-sided view on here.

Long term borrowing has never been so expensive matey...

IR's go up and down..

Inflation is the key ;)

Mervin King said that when people realsied this house prices would plunge..

Basing your economic view on the last decade, when the last decade has been a boom..

Well..

quite simply its not a great idea.

http://business.guardian.co.uk/story/0,3604,843624,00.html

taking on the biggest debt that you will ever consider..

three times that which would have been required 7 years ago..

and not understanding the implications of low inflation is natural selection at its best.

Morron

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"But despite the amount consumers owe on their home loans breaching the 13-figure mark, the group said the debt was dwarfed by the equity contained in the 'lower generations future wages'."

(of which they spied and licked their lips. almost salavating with desire...)

:lol:

Very good

Similar picture to what I had

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Unfortunately for those who dont realise though it 'evaporates' very slowly with low inflation.

Inflation according to GB/BoE is 1.8% ( cpi ) , long run is around 4.5% ( I stand to br corrected - just trying to illustrate the effect ).

If you borrow £100,000 now , in 10 years time in todays money that debt would be worth ( still to be repaid ).

Inflation @ 1.8% = £83,000 ish

Inflation @ 4.5% = £64,000 ish

D

Don't forget that it's wage inflation, rather than cost of living inflation, that erodes debt. You quote the figures for CPI, which is a cost of living inflation measure. You should be quoting wage inflation.

Billy Shears

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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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