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Mew Is Replacing Credit Cards And Loans. Explains Large Figures

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Has the World Cup effect saved the high street after all?

It certainly seems like it has made a difference, at least. Comet owner Kesa Electricals saw sales jump 11.3% in its first-half. Like-for-like sales – that is, excluding new or refurbished stores - at Comet rose 8.6% in the six months to July 18th. Sales were boosted mainly by strong demand for flat-screen TVs in the run-up to the football tournament.

Meanwhile, official statistics showed that retail sales rose for the fifth month in a row between May and June. For the three months from April to June sales were 2.1% ahead of the previous quarter. That’s the highest quarterly growth rate since February 2004.

So is this a cue to buy back into the retail sector?

We’re far from convinced that the apparent revival in the retail sector can be sustained. The main concern we have is – how are consumers paying for it all?

According to the British Bankers’ Association, UK consumers actually repaid a net £0.7bn on their credit cards during the first half of 2006. Net repayments were made in four of the past six months. Last year they borrowed a total of £1.1bn over the same period.

Meanwhile, personal loans and overdrafts are seeing fairly muted rises – last month consumers borrowed £189m in personal loans and overdrafts, compared to £669m in May.

So where’s all the money for those flat-screen TVs coming from? Look no further than the housing bubble. Net mortgage lending came to £5.6bn in June, and is up 18% on last year for the first half as a whole. The exact breakdown of the data is not available until later in the month, but generally remortgaging and equity withdrawal accounts for roughly half of new loans.

So the fall in credit card lending isn’t, unfortunately, down to people tightening their belts. They’ve just switched funding sources from their plastic cards to their mortgages.

There are several drivers behind this move to ‘putting it on the house’. One is that finance companies are tightening lending criteria on unsecured forms of lending, such as credit cards and personal loans. That means the indebted are forced to turn to secured lending as the only option open to them.

Another is that sheer levels of indebtedness mean that people are being forced to extend their debts over longer periods of time in order to shrink their monthly payments.

This trend has become particularly pronounced as most lenders have now stopped offering 0% interest rates on credit cards. Consumers are suddenly finding that debts which have been shifted from interest-free card to interest-free card over a period of years in some cases, are suddenly starting to accumulate interest.

Unable to afford the monthly payments, such borrowers take out "consolidation" loans. These are loans secured against their homes, which are then used to pay off the short-term debts. In the long term of course, it means paying far more interest on the debt - not to mention the risk of losing your home.

And with interest rates threatening to move higher in the coming months, lenders may well start to become more picky about unsecured lending too. Sub-prime lender Kensington Mortgages is already becoming more cautious. In its most recent results it admitted that it has deliberately accelerated the process of repossessing homes from defaulting clients.

Perhaps retailers would look like a good bet if the economic environment looked set to improve any time soon. But the pressure on household finances seems sure to continue for the foreseeable future.

Gordon Brown is coming under increasing pressure to push up taxes. UK public finances had their worst June ever last month, with Government borrowing rising to £7.3bn from £6.2bn the year before – much worse than the £6.5bn expected by analysts.

Mr Brown has now spent £16.4bn this year. That’s nearly halfway to the £36bn he plans to borrow between now and next April – and we’re only three months into the current financial year.

And as if higher taxes, soaring energy bills and huge mortgage debt were not enough, retailers themselves are putting pressure on consumers.

As Robert Cole pointed out in The Times earlier this week, shops are no longer content to keep slashing prices in the face of falling profit margins - and they are having less trouble pushing through price rises.

Commenting on this week’s above-forecast inflation figures, he said: “Across the board, there are signs that businesses see the time is right to push through those relieving price increases they have wanted to make for months, while people understand that energy costs are rising. Price rises are more acceptable.”

That might be good for retailers in the short term. But in the longer term, higher prices will just leave the UK consumer even more overstretched. And that means competition on the high street for the few pounds of disposable income left over will become even more brutal.

Suffice to say, we're not scouring the sector for bargains just yet.

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So the fall in credit card lending isn’t, unfortunately, down to people tightening their belts. They’ve just switched funding sources from their plastic cards to their mortgages.

Not at all surprised. The VI reports all mentioned the mortagage bit but not a mention of the re-mortgage stats. Only the BBA referred to it which was nice of them!

This is why the constant ramping by CML is not translating into actual HPI and the reason Gordon does not have to hike yet. HPI is over--the top has been reached and its like Ben at the Fed said- O-V-E-R.

But the debt bubble continues unabated which is another reason Gordon cannot hike--insolvency rates will go beserk and bring the entire economy down. THe Miracle Economy always looked like a "go now-and pay later" type of miracle. "Pay" being the operative word.

Edited by Realistbear

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The exact breakdown of the data is not available until later in the month, but generally remortgaging and equity withdrawal accounts for roughly half of new loans.

Anyone know when this data will become available?

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So the fall in credit card lending isn’t, unfortunately, down to people tightening their belts. They’ve just switched funding sources from their plastic cards to their mortgages.

Not at all surprised. The VI reports all mentioned the mortagage bit but not a mention of the re-mortgage stats. Only the BBA referred to it which was nice of them!

The exact figures aren't out. So they've no basis for making that statement yet.

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The exact figures aren't out. So they've no basis for making that statement yet.

They know!

You know, I know, I know that they know that you know that I know that they know that you know that I know that they know

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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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