Friday, June 5, 2009
Least likely group to find house prices interesting
One million people insolvent in the UK
One million people busted, broke, out of cash, and suffering the indignity of being swapped on the head with rolled up court proceedings.
Posted by stillthinking @ 10:24 AM (1349 views)
9 thoughts on “Least likely group to find house prices interesting”
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tudorian says:
A million people ……. the party’s over and the hangover kicks in.
Just a bit of anecdotal info, I have six friends / couples who are current swamped with credit card debts. They re all pursuing IVA’s at the moment. They are temporarily being helped by the engineered drops in mortgage repayments.
I’m afraid that I’m quite pessimistic about the next 5 years, it seems that we have postponed our / their collective misery, and at what price ??
Also know a young lad (25 ish) working (not particularly well paid) for one of the poorer performing, still private high street banks. He’s got a mortgage OK’ed in principle this week and is off looking for 3 bed semi’s around 160k. I tried to explain my reservations, but ‘ if you don’t get in soon, you’ll miss the market’ … hoping he doesn’t become another bankrupt in the next few years
crunchy says:
1. tudorian… More people work for the banks than they realise. Now, with no wage!
uncle tom says:
It really depends how you define ‘insolvent’
If you take it to mean people whose nett assets are less than their nett debts, the figure is a lot higher, and will get much higher still.
If you define it as the number of people who will ultimately default on their debt, then it might be about right, but that is a very hard statistic to predict.
I believe government will find it necessary to toughen the law on bankruptcy, but whether they do so sooner or later, before or after there has been a deluge, is anyone’s guess.
tudorian says:
@crunchy …so very true
@Uncle Tom
I think you’re right, the bankruptcy laws will have to be tightened, but my guess is that any tweaking to the law will come too late and take so long to introduce that it will be an incentive to take, rather than to discourage bankruptcy…
britishblue says:
Tudorian.
there is also a much more sinister thing happening with regards to credit cards.
Even though interest rates are at the lowest ever, credit cards are ramping up the monthly interest payements for roll over balances. Even people with flawless credit ratings are seeing their monthly interest payments rising to APRs in excess of 30%. Many of these people are solvent, employed and middle class. Many more are small business, who are not usual borrowers but due to the recession and trying to keep their businesses afloat and people employed have resorted to their credit cards as a form of bridging funding. Getting 40-50K on credit cards was relatively easy up to a year ago. (whilst many people on this site may decry them as stupid, I personally think a lot of very decent people got caught).
This ramping up of interest rates is a hidden tax that will ultimately reduce consumer spending and impact for many years to come.
Why are the credit card companies doing this?
a. Because their bad debt is rising at a shocking level. For evey IVA or bancruptcy they need to get their money back elsewhere.
b. Because in the small print of most credit cards they have the option of changing the interest rate at any time. We have politically correct rules all over the UK in what you can do and say, but extortion lives on.
I personally believe this credit card scandal is going to effect millions of people, with its obvious effects on consumption and the ‘housing market.’
There are going to be huge social problems and I dont quite know how this will play out with a conservative government in power. But I think it is going to get very messy in the next couple of years.
stillthinking says:
From the point of view that our economic malaise could be really described as a short squeeze, it is to be expected that those currently in debt should really be paying over the odds.
But what are the alternatives? For although there are undoubtedly people who are in trouble with credit card debt from desperation, and being pushed into a corner, the majority of debt in the UK has been taken on for personal gain. BTL in particular is the epitomy of extracting wealth from others by cornering the market in property precisely to establish some kind of monopolistic pricing policy.
Before I shed too many tears, I remember that the vast overwhelming majority of those in trouble now are in that position purely because of a failed attempt to pull 3 times my annual pre-tax wage off me, something that would take at least 5 years of disposable income, with the accompanying downgrade of the life of me and my family.
If those with savings can be persuaded to take a partial loss for debt forgiveness then I have no problem with that. I do have a problem with the government acting as a upwards wealth redistributor.
Absolutely it will get messy and there will be social problems.
uncle tom says:
BB,
The whole concept of credit cards was murky from the outset – why western governments allowed the card providers to peddle their plastic with so little constraint will probably engage the thoughts of future historians for years.
There has never been any virtue in offering credit for everyday expenditure, and pandering to the consumer’s sense of greed only causes them misery in the longer term.
If I were the chancellor, I would impose a tax on credit card (but not debit card) usage – perhaps 5% – that every UK merchant and ATM had to add to the amount charged, in order to discourage their use.
I would also require that the minimum monthly payment be raised to 20% for all new cards issued, and 5% for existing accounts; and to make it unlawful to increase someone’s credit limit, without checking their ability to pay.
techieman says:
Blimey Uncle Tom Im glad you are not the Chancellor… thats all a bit draconian. Personally i like the plastic – always charge it and pay it all off. If people cant be responsible then i dont see why other people that are should have to pay.
Its really a sad indictment of our society that we arent taught how to handle loans and debts, The real issue here is the fact that you can accumulate debt and then walk away from it. Moral Hazard.
As for the bankruptcy laws will have to be tightened – i cant see that either. I agree – not least because of what i just said – that would be sensible but thats not how its been so far – Undischarged bankruptcy has been reduced to 1year from 3 from 5(i think), and IVAs mean you can avoid and still not have to pay it all back. Morrally repugnant – especially if you have been an innocent creditor.
“Under new bankruptcy laws introduced on 1st April 2004 the statutory period for a bankruptcy was reduced from 3 years to 12 months. During the 12 months you are subject to the restrictions of the bankruptcy.
Also introduced in 2004 was the chance for early discharge, this is given when there is no investigation needed further into your affairs and where you have co operated fully with the Official Receiver. This is given at his discretion and therefore you could be discharged in 6-12 months.”
uncle tom says:
techie,
Have you ever been a merchant having to accept cards, because everyone else is?
They are really insidious – there’s no free lunch here – the merchants have to pay big time for the privilege of accepting them, and can’t, in practice, pass that expense on.
They’re evil – we would be so much better off without them.