Friday, June 16, 2006

Debt diary

Debt diary

This is the first of a series of articles on the Beeb site. Interesting reading as it sheds light on the attitude to debt of a young urbanite in the capital. Note how despite admitting to being in heavy debt, there is virtually no admission of fault on her part. Note also her indignation at the very reasonable responses she gets from her lenders. Oh - and she also has a couple of BTL's...

Posted by uncle tom @ 09:37 AM (2980 views)
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11 thoughts on “Debt diary

  • What I found interesting in this was that the author only discovered her BTLs were in negative equity when she was forced to evaluate them with the purpose of remortgaging them further. On discovering that they were in negative equity, there was no panic about falling prices – no reference to capital values at all. Indeed she justifies retaining the BTLs for the rental income, showing that she simply does not think in terms of capital value.
    I would guess that we all have a model of BTL owners as market-aware, constantly monitoring capital prices to protect their investments. Had our model ever been correct, there would already have been a rush by our ‘model’ BTL owners to sell.
    If this diary account gives a better picture of the market awareness of the typical BTL owner, then all is explained. They haven’t a clue what they are doing, and it will only be when rental voids force them into bankruptcy or a general panic takes hold that their behaviour will change.

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  • Astounding arrogance displayed in this diary

    Since when were banks expected to act as a combination of social services, charities and family planning support.

    How naïve does one have to be. If her pregnancy was planned surely she should have checked out the financial implications of being on maternity leave first or did she expect everyone else to cover her debt.
    Why should the banks help her out, surely we all know “YOUR HOME IS AT RISK IF YOU FAIL TO KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT”.
    Interesting though that if she sold her two BTLs that she would lose out.
    Not reckless spending, but 2 BTL that are over valued, or perhaps over MEWed (reckless borrowing it seems ) and reckless investing (restaurants have a very high rate of failure!)
    But lots of roosting chicken for the restaurant though.

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  • Mmm, let me think. It seems totally obvious that if she is having so much difficulty with debt that she should off-load some of the not-absolutely-necessary commitments, like selling one or both of the BTL’s. It really doesn’t take a genius to work that one out. I’m guessing the building societies will help her out on this front when she’s enough in default ! The frightening thing is I’m sure a lot of other people out there have the same myopic views regards managing their debt situations.

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  • Japanese Uncle says:

    If her tenants are in financial trouble, e.g. pregnancy or losing jobs, and unable to pay the rent, would she be able to afford the degree of kindness and generosity she expects her money lenders to demonstrate, and allow non-payment? No chhance, I guess.

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  • Selling would just crystalise her losses.

    I wonder what the investment yeild is? I bet she doesn’t even know what a yeild is.

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  • I can’t understand the problem here – according to the CML house prices are set to rise 14 billion percent in the next few weeks!!
    The woman just needs to sit tight and she will be a multi-milliionaire in no time!!

    Easy when you know how.

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  • George Monsoon says:

    Frostie, I could not agree more. Miopic views are more prevalent in this nanny state than ever before. There is an old saying that ignorance is bliss. What better example than the current ideology that is the housing boom!

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  • Wasn’t this posted a few weeks back?

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  • It’s great isn’t it…she actually sounds like she bears no responsibility at all for this mess…
    She is a victim in all this apparently, and that is quite sickening…
    Poor girl…she borrowed money because the banks encourage it, and everyone is a BTL speculator anyway, and she had to have some too…

    She is just a creation of the system we live in today…while she is responsible, the irony is that the banks have to share that responsibility beciase its this kind of victim that props up their balancesheet…

    I watch all this helplessly myself, as I try to buy a house to live in (london)…yes to LIVE IN…I cant afford one on the £50k I earn!

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  • Sebastian; yes it was posted a few weeks back, I’m waiting for the next instalment though I fear there may not be one…

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  • If I was one of her lenders I would consider giving her a payment holiday …………. unless, as is the case, she is in debt to several other companies. The first lender to take a hit is basically increasing her ability to repay the other lenders who refused to offer a payment holiday. The halifax might just as well give money away to their competition. It is naive in the extreme to expect interest freezes. Like Japanese Uncle says – she probably wouldn’t waive the rents on her BTLs. She basically wants the banks to give her money to buy BTLs and to make a profit on the BTLs by not repaying the banks?!?!?! And she claims the baby was planned – how irresponsible is it to intentionally get so far in debt before having a planned baby? Naivety can be almost forgiven, but stupidity on this kind of scale leaves me with no sympathy at all.

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