Friday, May 05, 2006

73% rise in bankruptcies

BBC News: Bankruptcies show dramatic rise

2006 could be a record year for personal insolvency with over 23,000 people becoming insolvent in England and Wales in the first 3 months of this year alone.

Posted by Webmaster @ 10:43 AM (589 views)
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1. Talking_rot said...

Many who post onto this Blog state the BBC is guilty of supporting the great house price conspiracy and decry accuracy of the BBCs reporting. Yet this article could add weight to the argument that UK house prices will crash. So, how many regular contributors will decry this article?

None? A few?

No sign of a House Price Crash yet alas

Friday, May 5, 2006 11:23AM Report Comment

2. Oberon said...

Since we've been having heated debates recently answer me this: I read that the UK population is due to INCREASE to 67 million by 2030, 70 million by 2060. That's an extra 10 million. How will there EVER be an HPC if these figures are true?

Friday, May 5, 2006 11:29AM Report Comment

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4. Ohhyesitwill said...

Oberon... population in this country has always increased, yet we have had several crashes, population alone does not determine whether there is a HPC, it's a tad more complicated.

Friday, May 5, 2006 11:37AM Report Comment

5. Talking_rot said...

Oberon, I try to get a balanced view to help me decide whether or not to buy in the next 2 years. Population increase does not automatically mean house price increases. Take a look at Japan. Japan has a similar geographical area to the UK but is very mountainous so has much less land available for housing. The population of Japan is about 80 millions. So why have house prices fallen to their 1992 levels then?

It is clearly economics that count. High populations cant buy houses when they have no cash! Ultimately though, I agree with you. Until there is a long and deep recession in this country house prices will not fall. In the short term and medium term I no longer believe the UK is on the verge of a deep recession and so I do not believe in a house price crash. What is a house price crash anyway? 5% drop over 1 year; 30 % drop of 3 years? A crash implies a bubble and you only have a bubble when asset prices inflate and then deflate over a defined, relative short period. I foresee a long period of gradual increase or stagnation until wages catch up or we (FTBs ie me) just give up and accept a life time of renting. The UK will then consist of those rich home owners and those poor, struggling renters. This is the social justice that the glubberment has engineered.

Friday, May 5, 2006 12:01PM Report Comment

6. Retiredbanker said...

As oil and many other natural resources are now depleting continual economic growth will soon no longer be
possible, and many environmentalists are saying that population levels will then have to fall.
Things will then start to get interesting!

Friday, May 5, 2006 12:03PM Report Comment

7. Paul said...

The threat of interest rate rises and skrocketing debt are the biggest threats to the economy since this gubberments come to power.

I do forsee this being the catalyst, because for ever 10 people in irrecoverable debt now, there are 100 who are on the brink, and an forced IR rise will send them there.

Friday, May 5, 2006 12:43PM Report Comment

8. Uncle Tom said...

I tend to agree with Paul - for every one of these new bankrupts, there are probably a dozen or more friends and aquaintances with severe debts who are asking 'what's it like?'

When they realise that these people still have cash in their pockets and smiles on their faces, and by and large, are not now ashamed of throwing in the towel, then many more will follow suit.

I don't believe the banks have really woken up to this one yet - the interest rates charged on consumer credit need to rise quite sharply to cover the losses properly.

Globally, the price of money is continuing it's relentless rise, and this is going to start impacting mortgage rates. As Paul says - there are many on the brink.

As a small aside, I am increasingly convinced that a large proportion of people whose finances are fundamentally unsound, do not really appreciate the fact. These people will only hit cold turkey when credit applications start being refused or their mortgage lender refuses to let them MEW again.

At which point, bankruptcy might seem the cool thing to do...

Friday, May 5, 2006 01:28PM Report Comment

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10. Ticktocktheredclock said...

I don't think anyone is suggesting that EVERY BBC story has been designed to just to prevent a HPC, just that its coverage of housing in general is almost always overly optimistic, and often (delibrately?)mis-leading

Friday, May 5, 2006 03:18PM Report Comment

11. Ticktocktheredclock said...

The banks know full well that many outstanding debts will not be recovered, but rather than pr-empting resolutions, they just kick the problems into the long grass by extending credit. As long as they can maintain the interest income they are usually happy. After all, most of the risk has been 'sold on' in the derivitives market anyway.
However, as consumers start to showing the signs of distress that may suggest a bankruptcy/IVA is imminent, they start hammering them with extra charges/fines etc. in an attempt to recover the max. possible before they go bust.
With this in mind, it is quite interesting to note the 'record' level of complaints that the banking sector has recently received on these matters. Could it be that consumers are at last realising that the banks always ask for their umbrella back as soon as it starts to rain?

Friday, May 5, 2006 03:34PM Report Comment

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14. Stromboli said...

You're right about the banks, so we sold 2 years ago and deposited in bank on a compound basis.......guess for whom they will be asking the umbrella back when the downpour starts!?

Friday, May 5, 2006 10:58PM Report Comment

15. Stromboli said...

You're right about the banks, so we sold 2 years ago and deposited in bank on a compound basis.......guess for whom they will be asking the umbrella back when the downpour starts!?

Friday, May 5, 2006 10:58PM Report Comment

16. Bidin'matime said...

Having put this comment on the Vorderman page, I think it's worth repeating here.
There is much evidence to show that people are consolidating their loans, which would be fine if they didnt just go out and borrow it all again. The simple fact is that most people budget for so much a month of outlay and borrow up to that. Therefore, having consolidated at a lower monthly payment level, they simply borrow more.

There is a maxim in business that says never borrow long to finance short this means, for example, if you buy something that will last 1 year, dont put it on a 5 year loan because when you need to buy the next one you will still be paying for the old one and even more the next year and so on until eventually you go bust. Well, this is exactly the mistake that so many people are making they cant afford a holiday, so they put in on the credit card, which they then add to their mortgage. Next year they put in on the credit card again and, hey presto, the house has gone up in value and they increase the mortgage again to consolidate their debts. Only now, they have to pay for more on their credit card, because they cant really afford the mortgage payments, so they are buying food and other essentials on the card. But never mind, the house has gone up in value again, so up goes the mortgage (self-certified, of course) and off we go again. Until the market staggers to a halt and / or interest rates rise then give them a matter of months, before they too will be knocking on the Official Receivers door asking to be relieved of all this unfair debt that people have wickedly lumbered them with

I agree that bankruptcy carries very little stigma these days - I have known plenty go bankrupt and say it was the best thing they ever did. As Uncle Tom says, the banks are going to have to recover these costs through raising interest rates, whatever the BOE says or does.

Saturday, May 6, 2006 03:05PM Report Comment

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