£40bn of household debt: Are we heading for another credit crunch?

[Cyclone]

And what do you think is going to happen when the base rate goes up for those already struggling to get and pay for mortgages ?

 

Those who are struggling to get will continue to struggle to get.

 

Those who have overstretched themselves will have to make changes. Perhaps causing the still long overdue house price correction that has never happened.

Which would coincidentally put an end to people borrowing more against their houses to buy cars or pay for holidays.

 

It's not going to be pleasant, but the sooner it happens the better, because the longer we wait, the less pleasant it will be.

 

---------- Post added 23-12-2015 at 09:00 ----------

 

What do they mean by debt? I don't see what they call debt as being debt.

It is just the figure between earnings and spending. That isn't debt.

 

I could spend £100K more than I earned next week and I wouldn't be in debt. That's because previously I've earned more than I've spent.

 

It just looks like a meanigless load of mumbo jumbo to me. As folks have pointed out, interest rates don't make savings worthwhile. So it doesn't mean taking £80K out the bank to buy a '63 E Type has put someone in debt. It just means their priorities have changed somewhat.

 

You are correct that it's talking about deficit and not debt, and that deficit could be fuelled by spending savings...

However, I think the average saving across households in the country is something like £1500... So that would fuel a £40 billion deficit for 1 year, but not ongoing.

This one

Unsecured debt, which includes credit card charges, personal loans, student loans and utility bills, stands at round £8,000 per household.

Appears to be an actual measure of debt, rather than deficit.

 

 

---------- Post added 23-12-2015 at 09:02 ----------

 

The America rate has just increased slightly, but their property prices for the average person are lower than the UK . I don't think the UK base rate will rise soon because the Bank of England governor knows it will be Armageddon for many struggling mortgage payers .

 

The low interest rate continues to fuel increasing house prices. How is that a good thing?

 

---------- Post added 23-12-2015 at 09:05 ----------

 

Merry Christmas to you too L00b!

 

I would be interested to see the figures without standard mortgages included, buy to lets probably should be although thinking about it, I'm not sure why now!

 

Many peoples mortgages are lower than equivalent rent so whilst it is 'debt' it's not really avoidable as you'd always need to pay to live somewhere and if you are going to include mortgages then you almost need to add lifetime rent to the pot as well. But as a standard measure to allow us to compare with similar countries.

 

Or alternatively, they should offset debt with assets, so mortgages+property will come out to a positive number for most people.

Edited December 23, 2015 by Cyclone

[sgtkate]

Those who are struggling to get will continue to struggle to get.

 

Those who have overstretched themselves will have to make changes. Perhaps causing the still long overdue house price correction that has never happened.

Which would coincidentally put an end to people borrowing more against their houses to buy cars or pay for holidays.

 

It's not going to be pleasant, but the sooner it happens the better, because the longer we wait, the less pleasant it will be.

 

---------- Post added 23-12-2015 at 09:00 ----------

 

 

You are correct that it's talking about deficit and not debt, and that deficit could be fuelled by spending savings...

However, I think the average saving across households in the country is something like £1500... So that would fuel a £40 billion deficit for 1 year, but not ongoing.

This one

 

Appears to be an actual measure of debt, rather than deficit.

 

 

---------- Post added 23-12-2015 at 09:02 ----------

 

 

The low interest rate continues to fuel increasing house prices. How is that a good thing?

 

---------- Post added 23-12-2015 at 09:05 ----------

 

 

Or alternatively, they should offset debt with assets, so mortgages+property will come out to a positive number for most people.

 

Yes, that would be far better measure than my waffle!

[Cyclone]

We could do that ourselves. Take the total public debt including mortgage, and then subtract the total value of privately owned housing. See what is left. (Might well be negative due to those who no longer have a mortgage, baby boomers and so on).

[L00b]

We could do that ourselves. Take the total public debt including mortgage, and then subtract the total value of privately owned housing. See what is left. (Might well be negative due to those who no longer have a mortgage, baby boomers and so on).

Shouldn't that be public plus private debt including mortgage? (that's where I went wrong and confused myself earlier )

Merry Christmas to you too L00b!

First one we're spending in our family home for the last 7 years or so, this year, so yes, thanks for your good wishes and I'm hoping it will be a good one indeed - same to you and yours of course

Many peoples mortgages are lower than equivalent rent so whilst it is 'debt' it's not really avoidable as you'd always need to pay to live somewhere and if you are going to include mortgages then you almost need to add lifetime rent to the pot as well. But as a standard measure to allow us to compare with similar countries.

I'm not sure that this would allow any more meaningful a comparison (other than straightforward based on numbers), because this urge to "get on the housing ladder" ASAP and at any price is very peculiar to the UK (and Ireland) relative to e.g. France, Germany, Spain <etc.> where long-term renting has been an accepted norm for decades and longer (it's only just starting, or maybe getting there, in the UK) and which has its own effect (more inertia) on property prices there. Besides the component of social stigma that is still attached to consumer credit/personal debt in these countries. Edited December 23, 2015 by L00b

[Cyclone]

By public debt I meant debt owned by the general public, not debt owned by the state. So technically that's private debt.

Sorry about the confusing wording.

[foxy lady]

http://www.ons.gov.uk/ons/rel/cap-stock/the-national-balance-sheet/2014-estimates/stb-national-balance-sheet--2014-estimates.html

 

 

The National Balance Sheet is a measure of the wealth, or total net worth, of the UK. It shows the estimated market value of net financial worth, for example shares and deposits, and non-financial assets, for example dwellings and machinery. Market value is an estimate of how much these assets would sell for, if sold on the market. Estimates in this publication are at current prices and periodicity is annual.

At the end of 2013, the net worth of the UK was estimated at £7.6 trillion. This was equivalent to an average of £119,000 per person or £289,000 per household.

Dwellings remained the most valuable non-financial asset in the UK. Dwellings have increased in value in recent years, except for a fall in 2008. At the end of 2013 they accounted for 61% of the UK's net worth.

The main reason for the increase in the net worth of the UK in 2013 was financial corporations. This sector increased by £421 billion (373%) in 2013. The most valuable financial transaction in this sector was loans with a financial net worth of £1.8 trillion.

Non-financial corporations provided the largest downward pressure on UK net worth between 2012 and 2013. This can be mainly attributed to a decrease (37%) in ‘equity and investment fund shares/units’.