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Hopeful FTB

Question About Interest Rates & Debt

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I have a question- there seems to be a general feeling in the media that even raising interest rates by 0.25% is bad & should be avoided at all costs.

(I know its a bit of a stupid question aswell- apologies!)

My question is- is there a way out of the current debt mess without it hurting a lot of people?

I know that no-one has a crystal ball but it seems pretty obvious that the current low rates arent going to last forever so when rates do start rising and people start getting into even more trouble, what are the government going to do as surely its going to be like financial armageddon- how does a government deal with this?

It seems almost like a stalemate situation at the moment.

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I have a question- there seems to be a general feeling in the media that even raising interest rates by 0.25% is bad & should be avoided at all costs.

(I know its a bit of a stupid question aswell- apologies!)

My question is- is there a way out of the current debt mess without it hurting a lot of people?

I know that no-one has a crystal ball but it seems pretty obvious that the current low rates arent going to last forever so when rates do start rising and people start getting into even more trouble, what are the government going to do as surely its going to be like financial armageddon- how does a government deal with this?

It seems almost like a stalemate situation at the moment.

You are right in that the govmt are in between a rock and another harder rock. One of the problems is that the BOE are seen by many as the Lender of Last Resort, who will bail out business when everything goes titsup.

However, they probably won't, so the final meltdown will take alot of people with it.

Most people will remain OK though, as long as they have an income. Many people who bought just one house a few years ago to live in on a sensible mortgage will be fine. The flippers and speculators will luck out though.

In answer, I don't think this mess of debt and inflation can unwind in an orderly and controlled way. There will be a number of triggers and a panic before it collapses.

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yes... the government will make it progressively easier and less painful to declare bankrupcy, forgiving everything except state debt (student loans, csa, tax credits etc). This will lead to a soft landing, with lenders gradually readopting more and more stringent lending criteria and raising interest rates voluntarily to protect themselves. Those in dire straits will go bankrupt, hopefully learning the lesson that credit is bad. A new system of iva's or similar will be brought in that protects homeowners, allowing them to off load all non secured debt easily, and put interest on hold for all secondary mortgages.

Or maybe we will all be going on an expensed adventure holiday to the middle east...

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I know that no-one has a crystal ball but it seems pretty obvious that the current low rates arent going to last forever so when rates do start rising and people start getting into even more trouble, what are the government going to do as surely its going to be like financial armageddon- how does a government deal with this?

Brush it under the carpet. OR if they do something about it, tighten the banks lending criteria.

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I have a question- there seems to be a general feeling in the media that even raising interest rates by 0.25% is bad & should be avoided at all costs.

(I know its a bit of a stupid question aswell- apologies!)

My question is- is there a way out of the current debt mess without it hurting a lot of people?

I know that no-one has a crystal ball but it seems pretty obvious that the current low rates arent going to last forever so when rates do start rising and people start getting into even more trouble, what are the government going to do as surely its going to be like financial armageddon- how does a government deal with this?

It seems almost like a stalemate situation at the moment.

We don't need rising interest rates necessarily.

Credit tightening by the banks will be enough. With repossesions increasing, unemployment set to rise, the banks will start to make it harder to get credit. It's already started happening. Last week I was told by my bank that the credit card interest rate is going from 12.2% to 16.9% - in one go! Credit card lending is already being tightened forcing people to turn to remortgaging for debt. This lending will also be tightened at some point. That will lead to falling prices for years.

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.

Interest rates went down in Japan but house prices went down for 15 years.

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Interest rates went down in Japan but house prices went down for 15 years.

Indeed. The only thing required to create a massive crash is for people to stop giving a crap about houses... which already seems to be the case with the 'iPod generation' who've been totally priced out of the market.

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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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