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U K Personal Debt Has Just Surpassed Total G D P

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http://www.telegraph.co.uk/money/main.jhtm...3/cndebt123.xml

Record numbers face debt meltdown
By Edmund Conway, Economics Editor
Last Updated: 2:05am BST 24/08/2007
The scale of Britain's personal debt mountain has come into sharp focus with new research showing a record number of households are facing serious debt repayment problems, and that
Britons owe more money than the entire economy can generate in a year.
They coincided with a warning from mortgage lender
Nationwide that house prices are set to fall sharply
back into line with wage inflation next year, as the credit crunch pushes up interest rates for families around the UK.

It doesn't get any clearer than this. The party is over and its going to be a long long hangover. :(

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Guest The_Oldie

It's not a problem though. Declan Curry (BBC Breakfast Business News) has pointed that the value of housing more than covers the difference, good old HPI :lol:.

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It's not a problem though. Declan Curry (BBC Breakfast Business News) has pointed that the value of housing more than covers the difference, good old HPI :lol:.

Yep I saw that this morning. He basically said that we didn't need to worry because the UK owns a lot of valuable housing!!! Hasn't anyone told him a house is only worth what someone is going to pay for it?

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Guest Charlie The Tramp
According to comparable figures from the Treasury, the landmark moment when debt exceeded GDP took place last year.

It took him a year before he wrote this article although it was posted here way back that personal debt alone had passed the GDP of the UK. :rolleyes:

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from the article

In the United States, the sudden failure of the poor to repay home loans in recent months has sparked a "sub-prime" crisis that has spooked the financial markets and wiped billions of pounds off share prices.

in other words : almost the entire financial market on Wall Street is dependent on some poor working people paying off loans at interest ie usury

If ever there were a clearer example of how modern day parasitical financial-capitalism (as opposed to useful industrial-capitalism) literally makes money off the back of poor working people then this is it.

How incredibly flimsy is the whole house of cards if all it takes is a few poor people to default on their loans to bring the whole thing down.

And for those who want to see misery brought to those people - SHAME ON YOU.

The ones we should want to see laid low are the speculators, stock-brokers, bankers, hedge-fund managers etc

Edited by jimmyjazz

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Yep I saw that this morning. He basically said that we didn't need to worry because the UK owns a lot of valuable housing!!! Hasn't anyone told him a house is only worth what someone is going to pay for it?

The BBC accidentally forgot to mention that while house prices are just a matter of opinion debt is real (Merv).

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from the article

in other words : almost the entire financial market on Wall Street is dependent on some poor working people paying off loans at interest ie usury

If ever there were a clearer example of how modern day parasitical financial-capitalism (as opposed to useful industrial-capitalism) literally makes money off the back of poor working people then this is it.

How incredibly flimsy is the whole house of cards if all it takes is a few poor people to default on their loans to bring the whole thing down.

And for those who want to see misery brought to those people - SHAME ON YOU.

The ones we should want to see laid low are the speculators, stock-brokers, bankers, hedge-fund managers etc

Bit of a joke! The "poor" included the hordes of speculators buying up houses in sunny Southern California that were $800k + with incomes around $60-$80k. With such huge multiples they could only go subprime as the conventional "conforming" loans still required proof of income and a 20% downpayment or you were sadlled with a large premium for PMI (payment mortgage indemnity). IMO Great Crash 2 is the market's revenge on the greedy, the BTLers and the speculators.

It is probably the case that the majority of the poor (sub $23k per annumn) remained renting as they would not even be able to afford property taxes on most houses.

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Bit of a joke! The "poor" included the hordes of speculators buying up houses in sunny Southern California that were $800k + with incomes around $60-$80k. With such huge multiples they could only go subprime as the conventional "conforming" loans still required proof of income and a 20% downpayment or you were sadlled with a large premium for PMI (payment mortgage indemnity). IMO Great Crash 2 is the market's revenge on the greedy, the BTLers and the speculators.

It is probably the case that the majority of the poor (sub $23k per annumn) remained renting as they would not even be able to afford property taxes on most houses.

RB, Lets have some real stats please instead of anecdotal evidence.

There are 2 MILLION Americans in trouble because they cant repay their loans and that is causing Wall St to get the jitters (a pathetic showing by the alleged financial wizards who operate there.)

How many of that 2 million are speculators and how many are simply poor people who wanted to own their own property (a basic human right I am sure we will all agree ) .

I want facts RB not your usual anecdotal BS.

edit: < $ 23k is defo poor but so is < $50k when you look at how much it costs to buy a goddam house these days )

Edited by jimmyjazz

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Nationwide must already have a rough idea of the August stats to be released at the end of next week.I reckon (like rightmove)there is a chance of another negative.The whole things seems to be imploding finally.

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I understand that it's a worrying prospect, but when most people purchased reasonably priced houses in the past at 3.5 times income did they not owe more than they could generate in income in a year ? So, what's the difference ?

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I understand that it's a worrying prospect, but when most people purchased reasonably priced houses in the past at 3.5 times income did they not owe more than they could generate in income in a year ? So, what's the difference ?

the system works fine while some people are debtors and some are creditors but when EVERYONE becomes a debtor the wheels come off as we are seeing.

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RB, Lets have some real stats please instead of anecdotal evidence.

There are 2 MILLION Americans in trouble because they cant repay their loans and that is causing Wall St to get the jitters (a pathetic showing by the alleged financial wizards who operate there.)

How many of that 2 million are speculators and how many are simply poor people who wanted to own their own property (a basic human right I am sure we will all agree ) .

I want facts RB not your usual anecdotal BS.

edit: < $ 23k is defo poor but so is < $50k when you look at how much it costs to buy a goddam house these days )

Do you have any facts to back up your claim that the subprime mortgagors are poor? Define poor in the US context.

I lived in SoCal (San Diego County) during the miracle years and there were no "poor" in the froth markets as the cheapest properties started at around $400k and that means $6k per annum property taxes before you even think about a mortgage payment. SoCal is the epicentre of GC2 and over 80% of loans taken out in the run up to the turnaround were subprime and these were for houses with a median value exceeding $600k.

Granted some poor got caught up in the exuberance but to try to say this was not primarily a greedy speculation game by the middleclasses is to miss the reality.

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It's not a problem though. Declan Curry (BBC Breakfast Business News) has pointed that the value of housing more than covers the difference, good old HPI :lol:.

Yeah, I saw that. But he actually said something like 'but it's OK, economists say that the value of housing more than covers it.....'.

I reckon he's more bearish than we think.

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Despite the Nationwide saying how worried they are about people over stretching themselves they are still happy to lend 4.5x joint income. This is simply asking for trouble. It might be possible for people to cover over 2.5x joint when interest rates are 3.5% but at nearly 6% and with the long term average of 7% it's asking for trouble. I typed my details into the calculator on their site and they were happy to lend me £400,000 more than I have calculated I can afford. These people are being hugely irresponsible.

I can't help thinking that they now daren't change the multiples as they know that a retail credit crunch really will cause instant carnage and none of them want to be held up as reponsible.

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Do you have any facts to back up your claim that the subprime mortgagors are poor? Define poor in the US context.

well RB the wealthy arent the ones unable to pay their mortgages are they ? And I would say a pretty good definition of poor would be a first-time buyer who cant repay his mortgage when interest rates go up a few points.

of course if house prices hadnt been so ridiculously high in the first place then they wouldnt have had to get into such high levels of debt,

it is astonishing to think that this debt was then packaged as highly attractive investment deals by Barclays etc

http://www.telegraph.co.uk/money/main.jhtm...4/cnbarc124.xml

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well RB the wealthy arent the ones unable to pay their mortgages are they ? And I would say a pretty good definition of poor would be a first-time buyer who cant repay his mortgage when interest rates go up a few points.

of course if house prices hadnt been so ridiculously high in the first place then they wouldnt have had to get into such high levels of debt,

it is astonishing to think that this debt was then packaged as highly attractive investment deals by Barclays etc

http://www.telegraph.co.uk/money/main.jhtm...4/cnbarc124.xml

When you borrow more than you can afford to repay youa re technically poor viz. that purchase. The homeowners now in trouble in SoCal are middle class earning a decent wage but not enough to afford the speculative prices that houses ac hieved in the final years of the boom. With a median price over $600k in San Diego county you needed to be wealthy even by CA standards to buy the average house. People on a good income of $100k plus are now in trouble as you need at least twice that to sustain a purchase over $800k.

Buty I agree-the whole thing is ridiculous and I am surprised it lasted so long as it did.

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When you borrow more than you can afford to repay youa re technically poor viz. that purchase. The homeowners now in trouble in SoCal are middle class earning a decent wage but not enough to afford the speculative prices that houses ac hieved in the final years of the boom. With a median price over $600k in San Diego county you needed to be wealthy even by CA standards to buy the average house. People on a good income of $100k plus are now in trouble as you need at least twice that to sustain a purchase over $800k.

Buty I agree-the whole thing is ridiculous and I am surprised it lasted so long as it did.

I dont have the stats and neither do you it seems .

But I am willing to bet that the majority of that 2 million are just poor suckers like me.

re Barclays: did you read that article about SIVs etc more like SPIVS,

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High leves of personal debt are not a problem if interest rates are low. What matters is a debtors ability to service their debts, and that's why the interest rate is crucial in all of this.

Interest rates have gone up- hence the recent financial crisis. However, I firmly believe that rates have now peaked. Why?

1. CPI now below target at 1.9%

2. The recent events in America. The Fed responds to a financial crisis by cutting the discount rate by 50 basis points. The financial markets always get what they want.

Interest rates will come down, because if they don't their will be more insolvencies and bad debts, and the Fed, as they've just proved, won't allow that to happen. People on this site scoff at those who say that the UK government won't allow the housing market and the credit bubble to collapse, but recent events have proven this point of view to be correct. You can also add in the 2005 interest cut for good measure.

No crash, it won't be allowed to happen because interest rates will be cut, not increased even if it means adjusting inflation accordingly to justify desired changes in monetary policy by the plurocratic elite that dominates life in Britain and America. That's why the FTSE has gone up by 400 points in ONE week!

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Yep I saw that this morning. He basically said that we didn't need to worry because the UK owns a lot of valuable housing!!! Hasn't anyone told him a house is only worth what someone is going to pay for it?

Be reasonable, you can't expect people to differentiate between nominal value and comparative value. :rolleyes:

Just shows how controlled our minds are. Said in this context, omitting the fact that debt is the vehicle that transports house prices to these levels. What a berk!

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well RB the wealthy arent the ones unable to pay their mortgages are they ? And I would say a pretty good definition of poor would be a first-time buyer who cant repay his mortgage when interest rates go up a few points.

Of course if house prices hadnt been so ridiculously high in the first place then they wouldnt have had to get into such high levels of debt,

it is astonishing to think that this debt was then packaged as highly attractive investment deals by Barclays etc

http://www.telegraph.co.uk/money/main.jhtm...4/cnbarc124.xml

Not sure about that JJ. I have a friend on over £200k per year who has simply bought a house that's too expensive. He can just about keep his head over water if he works 14 hour days but any increase in interest rates or slow down in the econmy and he and his 3 children are toast. His basic salary covers only the IR portion of the mortgage leaving no money for repayment, food, clothes, bills etc.

As per my previous post, Nationwide are willing to lend me a mortgage where the repayments are 56% of our joint income. What happens if one of us loses our job or has a paycut when the repayments are £5680 every month. That sort of money eats you savings very quickly.

Sub prime in the states is...

1) Poor

2) Jumbo loans over £200k

3) Self cert

If anyone thinks that represents only 10% of the UK market as I regularly hear on the radio then they are barking.

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High leves of personal debt are not a problem if interest rates are low. What matters is a debtors ability to service their debts, and that's why the interest rate is crucial in all of this.

Interest rates have gone up- hence the recent financial crisis. However, I firmly believe that rates have now peaked. Why?

1. CPI now below target at 1.9%

2. The recent events in America. The Fed responds to a financial crisis by cutting the discount rate by 50 basis points. The financial markets always get what they want.

Interest rates will come down, because if they don't their will be more insolvencies and bad debts, and the Fed, as they've just proved, won't allow that to happen. People on this site scoff at those who say that the UK government won't allow the housing market and the credit bubble to collapse, but recent events have proven this point of view to be correct. You can also add in the 2005 interest cut for good measure.

No crash, it won't be allowed to happen because interest rates will be cut, not increased even if it means adjusting inflation accordingly to justify desired changes in monetary policy by the plurocratic elite that dominates life in Britain and America. That's why the FTSE has gone up by 400 points in ONE week!

I totally agree with your statement that the Fed and BoE will try to prevent a bubble collapsing, despite all of their talk of moral hazard and fighting inflation. The average Brit or American has seen the real value of their salary plummet over the past 5-7 years, all the while, central banks (who created the situation) pretend that it isn't happening. [insert expletive about their mothers here]

The problem with your argument, though, is that current purchase prices are so heavily dependent on assumptions of future capital gains, not just current interest rates, and that gives the central banks much less control over the situation than they'd like. If you look at BTL rental yields in the UK (the FT says they average around 3.5% lately), most purchases from the past couple years are probably under water compared to monthly interest payments. The only reason to hold on to these properties is the capital gain. Once the upward momentum stops (as we're seeing in the US), the underwater properties (along with all the houses that marginally solvent borrowers are trying to get out from under) flood onto the market and house prices fall. The base rate would have to be cut in half for the BoE to save the situation, and that would be just too obviously stoking inflation (even CPI inflation) for them to get away with. I do believe that investors have gotten wise to the subprime securitization/CMO game that the investment banks have been playing for the past 5 years, and interest rates for residential mortgages aren't going to return to the rates of 2-4 years ago for quite some time. A bubble is all based on momentum -- once that's gone, the game is over.

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Guest Bart of Darkness
it also says that the average household debt is 54k -including the mortgage

May I express my sincere condolances to whoever has my household's 54k share.

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