Wednesday, November 30, 2011

Debt deflation?

Home owners paid back £92bn on mortgages

Home owners paid back £9.15bn more than they took out from their mortgage in the three months to the end of June, the figures showed. This was the most consumers have ever paid back in a three-month period since at least 1970, when the Bank of England started collecting data. Until the financial crisis families have regularly remortgaged their homes and used the money to fund holidays, new cars, school fees or other big purchases. Housing equity withdrawal, as it is technically called, is one of the most important drivers of the economy because the money unlocked from property then ends up boosting consumer spending.

Posted by drewster @ 04:57 PM (2528 views)
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13 thoughts on “Debt deflation?

  • mark wadsworth says:

    It’s not “money unlocked from property” is just borrowing.

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  • Gotta love Mortgage Equity Withdrawal:

    “I’m so rich!!!” people think. “Look at all the money I can borrow!”

    Well, if you’re getting richer, why do you have more debt then???

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  • general congreve says:

    Well that’s £9.15Bn off the £1.6Trn private debt load at current ultra low interest rates. At this rate, with interest rates staying at 300-year lows and swathes of people not losing jobs in a depression, until the debt is paid back, then that’s about £40Bn a year off the total debt. So it’ll all be paid back in…

    400 years!

    Way to go debtors! Keep up the good work, we’ll be out of this mess by Xmas. 2412.

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  • I cannot see why people think this will be any different to japan…..deflation,property crash,kids leave the country as they are priced out despite the crash and debt twice what it was in 1991…

    imo the whole world is going in this direction and nothing can be done about it.

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  • Me and my MRS put every penny we have into overpayments…reason being that the more you pay off the less interest you pay over the whole term. And we want to be able to afford a life one of these days.

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  • I cannot see why people think this will be any different to japan…..deflation,property crash,kids leave the country as they are priced out despite the crash and debt twice what it was in 1991…

    No event is repeated in exactly the same way.

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  • C4 news just reported that household disposable income in 2015 will be lower than in 2002! With rising energy bills it is a wonder that repaying mortgages is actually possible.

    Of course a fall in property values will mean less money can be taken out against properties. Also many people have probably already maxed out the amount they can take out against their property and so these figures are no surprise in that respect.

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  • “No event is repeated in exactly the same way.”
    But different events can have the same effects.

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  • Sneaker: “”I’m so rich!!!” people think. “Look at all the money I can borrow!” Well, if you’re getting richer, why do you have more debt then???”

    Brilliant.

    See also two of the standard Home-Owner-Ist arguments: “LVT is an attack on wealth” and “LVT takes no account of ability to pay”

    Er… is that not a contradiction in terms? A proper tax/attack on wealth, like income tax, does take into account ‘ability to pay’. So either LVT is not an attack on wealth (my view) or people who have a privileged legal position imposed in everybody else aren’t really wealthy (also my view) or… what exactly? What is a better measure of personal wealth (or personal property) – your earned income or how much land society has allowed you to occupy rent free?

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  • ontheotherhand says:

    MW, did you see Your Money and How They Spend It with Nick Robinson last night? They went through various types of tax, showing that complex rules and high rates have big corporates and the rich able to avoid it. They eventually discussed a tax ‘which nobody could avoid or take abroad’, and looked around a £20m home paying £2k council tax. They got out the big Chancellors and treasury officials past and present who said LVT is a tax that economists like and works very well in theory, but it is political suicide to attempt it. David Laws was saying how tax systems get incrementally complicated and inefficient over time, and that it is only once in 25 years where events prevent an opportunity to wipe the slate clean. If we don’t do it now we’ll have to wait another 25 years.

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  • mark wadsworth says:

    OTOH, damn, I missed it. The first episode was a but fluffy but interesting nonetheless and i was actually quite looking forward to part two.

    And LVT is NOT political suicide, actual “losers” under the scheme, assuming no changes in behaviour and obstinate refusal to take up one of the millions of jobs that will be created once the tax burden on business is more or less abolished are less than ten per cent of all households. Most households will find that their LVT bill and CI payments (which is mathematically and administratively easier than faffing about with personal tax free allowances) net off to within a couple of thousand pounds a year either way, once we’ve got it people will ask what all the fuss had been about and why we didn’t always run the tax/welfare system like this.

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  • “Your Money and How They Spend It”

    Best part of last night’s episode was the Southport woman with 4 kids whingeing about being hard up when her husband was earning £49k per year.

    Obviously they hadn’t heard of contraception.

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