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sam

Bad Debt Is Hurting, And It Is Only Going To Get Worse.

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I hope i have shown my credentials as a Bear on this board(with a few doubts) :)

But i have one big question mark, which i am now going to try and articulate again, hopefully without one or two members on this otherwise brilliant board branding me a troll.

My biggest interest over the last 5 years has been the size of debt people have taken on, today it has reached crazy levels. My interest in Debt came before my interest in any possible property crash, they both became linked for obvious reasons.

I do not have much time today, so i will keep it to the point, why has the debt strain not shown up in the property indicies yet.

The problems i knew that were going to come from debt have now arrived, people have been stretched to the limit, yet the one asset you would have put your life on as being efected has infact done the opposite.

So the big question as far as i am concerned is

WHY IS DEBT NOT KILLING THE PROPERTY MARKET

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I hope i have shown my credentials as a Bear on this board(with a few doubts) :)

But i have one big question mark, which i am now going to try and articulate again, hopefully without one or two members on this otherwise brilliant board branding me a troll.

My biggest interest over the last 5 years has been the size of debt people have taken on, today it has reached crazy levels. My interest in Debt came before my interest in any possible property crash, they both became linked for obvious reasons.

I do not have much time today, so i will keep it to the point, why has the debt strain not shown up in the property indicies yet.

The problems i knew that were going to come from debt have now arrived, people have been stretched to the limit, yet the one asset you would have put your life on as being efected has infact done the opposite.

So the big question as far as i am concerned is

WHY IS DEBT NOT KILLING THE PROPERTY MARKET

Because it's fuelling it.

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Because it's fuelling it.

Yes. Until it start really hurting the lenders and they cut the money supply off HPI will find support. It also worth noting that the bulk of the debt problems are with people who are renting.

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Its starting to bite now.

The great credit card tarting thing is baing reeled in as the card companies are shortening the time of 0%.

CAB said half their calls are about bad credit. With one bright spark rackin up £300 and odd thousand on 64

Illl try to find the link to that but its doubfull I'll remeber where it was

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Its starting to bite now.

The great credit card tarting thing is baing reeled in as the card companies are shortening the time of 0%.

CAB said half their calls are about bad credit. With one bright spark rackin up £300 and odd thousand on 64

Illl try to find the link to that but its doubfull I'll remeber where it was

I wonder if stories like these are keeping those banks P/E's down. The sector has performed very badly.

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I think it always was 'going to be different this time'. My own feeling is the reason we have this double peak is that people will turn to any form of credit before losing their house. With credit so much more accessible and 'acceptable' these days it was always going to have a wide peak at the top, but when the taps are turned off, then it will REALLY drop as a deluge of forced sales hit the market.

I can't see that massive debt is going to create a slow and steady fall, only catastrophic failure.

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Yes. Until it start really hurting the lenders and they cut the money supply off HPI will find support. It also worth noting that the bulk of the debt problems are with people who are renting.

This is a good example of what i have been keeping an eye on, the good debt bad debt argument, and the half truth about people renting.

Example. A person could have £250k in debts, most of it mortgage debt, but if his house is worth say £300k, it is all nice GOOD clean debt.

Another man could say have only £5k Debts but no assets(property), yet his are BAD debts.

There is a lot of ways to look at this, i see the chap with the GOOD debt as having all the strain, and i am talking real life here, i see the man with the BAD debt as someone who is keeping his powder dry. Technically the Good debt man has £50k in profits. Bad debt man has far less to worry about these days but is second class in the UK. Good debt man is crapping himself that his Scrooge like approach to property wealth is just going to vanish one day, you see these people on PMT fool everyday.

"We are only two turns of the credit screw away from a Crash:

The first will put HP inflation into reverse, and the second will be a more severe credit tightening, which will be a reaction to all the problems thrown up by the first. When the tightening is done, BTL loans will be back down to a maximum of 60-70%, and a price slide will be well underway."

see: http://www.housepricecrash.co.uk/forum/ind...showtopic=21887

Agree.

I have allways thought(and still do), that if there is such a thing as VI's, and i think there are, the one big thing they are trying to avoid is MOMENTUM.

Momentum has created the peaks we now see, many have purchased property for the simple reason that it is going up, if we get three bad months(IMO) the game is up.

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Momentum has created the peaks we now see, many have purchased property for the simple reason that it is going up, if we get three bad months(IMO) the game is up.

We have seen three bad months before (double peak), but it did not lead to the HPC. I think you need to look at what else is going on around the market before you can call the HPC.

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Look at the bankruptcy and house repossession stats:

http://www.housepricecrash.co.uk/forum/ind...15entry390783

This will feed throught to mortgagee and bankruptcy sales in due course. A half percent rise in interest rates will send these stats inter stellar as people have borrowed up to the eye balls. When people are forced to sell, either on their own initiative or by their mortgagee or trustee in bankruptcy forcing them to sell, this will have a knock on effect on prices. Factor in HIPS and next year is looking depressing for home owners.

;)

Edited by nimmmm

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We have seen three bad months before (double peak), but it did not lead to the HPC. I think you need to look at what else is going on around the market before you can call the HPC.

I do not agree, infact at worse the market has only flatlined IMO, it has been a little up or a little down with the odd shock(1 month) here and there.

I am talking about all the indicies showing sizable falls for three months in a row and with a background of economic gloom, that then will be the beginning of an uncontrolable decline, nothing will then save the property market.

It is like swinging a bucket of water which is tied to a length of rope around your head, keep the speed going and you hold onto all of the water, start loosing speed and momentum and the lot comes out

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Cheap money courtesy of Japan is coming to an end and with it low IR to fuel HPI-MEW-credit card splurging.

Lenders are addicted to credit also as they survive only because people borrow.

When the debt has to be repaid there will be a recession as the price we are all going to pay for the "Miracle Economy" that has been nothing more than borrowing and spending someone elses money--namely Japan's.

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This debt talk is being overdone - I don't care what 'spin' is put on news releases by groups with a vested interest like CCCS (after all they are probably looking for extra funding)

I don't know anyone who has bad debts, is struggling or is being stupid with their credit cards.

The vast and I mean 95% of the population are not struggling in fact they are all doing very well.

We live in a 'sensational' age where 'debt' can be sensationalised and made into TV programmes, then someone will do it.

Thats why debt isn't affecting house prices, becuase for many, many people, house prices are affordable and only a small number would be caught out by IR rises.

16 months ago I had a bet with consa, he said that IRs would be 6% within 2 years - this was at a time when this board was awash with speculation about how IRs were going to rise and people would be wiped out. With only 8 months left to go, there is NO chance IRs are going to be 6% - in fact it is more likely they will be 4.5% or possibly 4.75% if you believe the talk in the newspapers.

HPC - not a snowballs chance in hell of a crash !!

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This debt talk is being overdone - I don't care what 'spin' is put on news releases by groups with a vested interest like CCCS (after all they are probably looking for extra funding)

I don't know anyone who has bad debts, is struggling or is being stupid with their credit cards.

The vast and I mean 95% of the population are not struggling in fact they are all doing very well.

We live in a 'sensational' age where 'debt' can be sensationalised and made into TV programmes, then someone will do it.

Thats why debt isn't affecting house prices, becuase for many, many people, house prices are affordable and only a small number would be caught out by IR rises.

16 months ago I had a bet with consa, he said that IRs would be 6% within 2 years - this was at a time when this board was awash with speculation about how IRs were going to rise and people would be wiped out. With only 8 months left to go, there is NO chance IRs are going to be 6% - in fact it is more likely they will be 4.5% or possibly 4.75% if you believe the talk in the newspapers.

HPC - not a snowballs chance in hell of a crash !!

I agree a certain amount that "most" people are doing OK at the moment, but the following debt stats are still worrying:

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

Britain's personal debt is increasing by ~ £1 million every four minutes
Citizens Advice Bureau (CAB) dealt with 1,128,000 debt enquiries last year.
On average it would take CAB clients 77 years to pay back their debts in full.
The average person has just £27 a week left to live on after meeting all their bills and essential outgoings

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This link from the CAB has up-to-date info on UK debt: http://www.citizensadvice.org.uk/deeper_in_debt-2.pdf

Summary

This report sets out the characteristics of Citizens Advice Bureau debt clients. The debt survey updates the 2003 Citizens Advice report, In too deep. It draws on survey data collected from 567 clients from 61 bureaux across England and Wales. What is clear is that debt is a continuing and often debilitating problem for an increasing number of people, with its effects often felt most strongly amongst the most vulnerable members of society.

Main findings

Nearly two in five households in this survey depended entirely on benefit income.

The average total household debt was £13,153, an increase of approximately 30 per cent between 2003 and 2006.

On average, debts were 17.5 times the client’s total monthly household income. This is a significant increase from 2001 when average debts were 14 times a client’s average total monthly household income.

Half of the clients in the survey had less than £20 per month to offer to all of their creditors, and over half of those had nothing to offer creditors at all.

On average it would take CAB debt clients who were able to make a repayment to their non-priority creditors 77 years to repay the debts at the amount offered.

Only 10 per cent had a positive balance in a bank or building society account and the average amount held was only £404. Forty four per cent had other assets, such as a vehicle, their home or a life insurance policy.

However, in many cases the value of these assets may not be realisable.

Twenty three per cent of CAB debt clients in this survey had a disability or long-term illness.

Citizens Advice believes that a significant proportion of CAB clients will benefit from the Debt Relief Order proposed by the Insolvency Service.

Edited by HouseDog

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This debt talk is being overdone - I don't care what 'spin' is put on news releases by groups with a vested interest like CCCS (after all they are probably looking for extra funding)

I don't know anyone who has bad debts, is struggling or is being stupid with their credit cards.

The vast and I mean 95% of the population are not struggling in fact they are all doing very well.

We live in a 'sensational' age where 'debt' can be sensationalised and made into TV programmes, then someone will do it.

Thats why debt isn't affecting house prices, becuase for many, many people, house prices are affordable and only a small number would be caught out by IR rises.

16 months ago I had a bet with consa, he said that IRs would be 6% within 2 years - this was at a time when this board was awash with speculation about how IRs were going to rise and people would be wiped out. With only 8 months left to go, there is NO chance IRs are going to be 6% - in fact it is more likely they will be 4.5% or possibly 4.75% if you believe the talk in the newspapers.

HPC - not a snowballs chance in hell of a crash !!

people dont talk about their debt problem with others unless they are at the very end, so dont count on that. I know of people who had few BTL sold up(probably at lose, in the East end of London after the Olypic Annoncement) and working in Supermarket to support the bills.

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The vast and I mean 95% of the population are not struggling in fact they are all doing very well.

Probably this most ridiculous thing I've read on this forum - You seem to have got your head stuck where BRUNO usually leaves his umbrella :rolleyes:

14 million adults (35%) are relying on their overdrafts to get by each month; 3.5m are permanently overdrawn, while two million workers start the month in their overdraft, even after they have been paid.
Edited by cupidstunt

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Just a few thoughts.

Bankrupts do not lose their houses for at least one year! IVA's allow people to wipe off large proportions of their debt, unsecured lenders might be the big losers.

HIP's, as I understand it, the inspectors are government licenced or government employed, and is there not a shortage of qualified inspectors, surly this gives the government an opportunity to restrict the number of houses hitting the market.

I also have a sneaky feeling that this time round the mortgage lenders will offer a solution to those in danger of repossession in some sort of rental scheme, ie the bank will take possession, but allow OO to become tennants.

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Just a few thoughts.

Bankrupts do not lose their houses for at least one year! IVA's allow people to wipe off large proportions of their debt, unsecured lenders might be the big losers.

HIP's, as I understand it, the inspectors are government licenced or government employed, and is there not a shortage of qualified inspectors, surly this gives the government an opportunity to restrict the number of houses hitting the market.

I also have a sneaky feeling that this time round the mortgage lenders will offer a solution to those in danger of repossession in some sort of rental scheme, ie the bank will take possession, but allow OO to become tennants.

Agree with a lot of what you've said!

Regarding the HIP's There are a whole load of Inspectors who will have qualified by June 07. In fact they'll probably be too many as a lot of peiople will put their properties on the market prior to the deadline.

Regarding repo's, I agree that many lenders may end up having their OO as tennants. However the BTL Muppets will have their homes repossesed as they will be using them as security against a business!

Edited by cupidstunt

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I also have a sneaky feeling that this time round the mortgage lenders will offer a solution to those in danger of repossession in some sort of rental scheme, ie the bank will take possession, but allow OO to become tennants.

This is a scary scenario, allowing bad debtors to MEW to the hilt, then go bankrupt without feeling they have lost their biggest asset.

I guess this will maintain high house prices & force lenders to pass any costs to the responsible borrowers & savers again.

Reckon the renters will have a 'right to buy' later down the line?

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It also worth noting that the bulk of the debt problems are with people who are renting.

Possibly because the can't release equity. I personally know many people who have mewed to pay off debts, in some cases two or three times.

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Guest Alright Jack

It is my belief that the vast majority of the pain will be off-loaded onto the PAPER MARKET. (Stocks, bonds, funds, cash, bank deposits etc - via inflation and fear of inflation driven sell off)

Government will use every means to provide liquidity and props to the banking system and individuals (they will print ENORMOUS quantities of money and drop it from the heavens on the nation). It is the only way out now. This means a huge devaluation of the pound and rip-roaring price inflation. The minimum wage will sky-rocket because it tracks the CPI which is going up, up and away. The Bank will appear to act responsibly by raising rates in step with CPI.

This cyclone will not terminte until the debt is back down to a manageable level at which point interest rates will FINALLY spike above the real rate of money creation (M4).

The road ahead will be strewn with the bankruptcy of the most over extended and, worst of all, those who save and invest and trust in the system will be shafted.

This course of action is risky indeed since if the light switches on in too many peoples heads, it's all over. Hyperinflation.

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"person could have £250k in debts, most of it mortgage debt, but if his house is worth say £300k, it is all nice GOOD clean debt.... Technically the Good debt man has £50k in profits"

YES. But, as you know:

If that £300K property loses only 15% of its value, the equity is gone. And if banks tighten in the slightest, his MEW lifeline is gone. The other man with just £5K of debt is a better risk the minute you start stress-testing property values

Good point!

What would the personal debt numbers look like if house prices fell by 5%? Would this trigger a tightening of the lending rules? And would this precipitate an unstoppable decline.

I think that government and lending organisations are doing a Micawber on the economy. They are hoping that something will come along to get them out of this national debt predicament. They are on the edge of a precipice and to buy time the lenders are relaxing the lending rules (and also massaging the statisics and pumping out propaganda). This of course only makes things worse. For their part, the government and bank of England are cooperating by looking the other way.

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Guest pioneer31

This debt talk is being overdone - I don't care what 'spin' is put on news releases by groups with a vested interest like CCCS (after all they are probably looking for extra funding)

I don't know anyone who has bad debts, is struggling or is being stupid with their credit cards.

The vast and I mean 95% of the population are not struggling in fact they are all doing very well.

We live in a 'sensational' age where 'debt' can be sensationalised and made into TV programmes, then someone will do it.

Thats why debt isn't affecting house prices, becuase for many, many people, house prices are affordable and only a small number would be caught out by IR rises.

16 months ago I had a bet with consa, he said that IRs would be 6% within 2 years - this was at a time when this board was awash with speculation about how IRs were going to rise and people would be wiped out. With only 8 months left to go, there is NO chance IRs are going to be 6% - in fact it is more likely they will be 4.5% or possibly 4.75% if you believe the talk in the newspapers.

HPC - not a snowballs chance in hell of a crash !!

care to tell us where you plucked the '95%' figure from, or is it just wild speculation?

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The vast and I mean 95% of the population are not struggling in fact they are all doing very well.

True.

Did anyone see Question Time on telly last night, they had the shadow Housing Minister on.

He mentioned the words "public spending at an all time high" and "personal borrowing let-rip" and then when asked what policies the tories had (ha ha), he said there would be no tax cuts and then he mentioned the words "we will do all we can to protect the value of peoples homes"

So no HPC with the tories in charge then.

But whats telling to me is that if houses were so unaffordable to FTBs, why, on prime-ish time TV, with a housing minister on, were young priced-out FTBS not storming the place with placards.

Or at least asking a question...?

Or maybe there aren't actually that many priced out FTBs...

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  • 343 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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