One reason there isn't cash in our economy...
Discussion
Home owners pay a record amount off of mortgages
Telegraph said:
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 – with a few exceptions – 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.
Until the financial crisis families have – with a few exceptions – 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.
V88Dicky said:
So if we were all prudent with our finances, and lived within our means, the economy would collapse?
A collapse? Perhaps. Or it would revert to how it should have been had we not been so crazy. In the "Would life be "better" if credit cards didn't exist" thread, I posted:The problem with the old "bankers are evil" statement is that they made easy credit possible but it's the same people who complain about it who likely have their 50" LCD TV, Audi 330 AMG Sport 4x4 (
) and their exotic holidays on the never never. Now, the problem is that while I like to criticise them for being idiots and destroying the country (the moaners, more than the bankers), if it wasn't for credit (or debt as I prefer to call it), there'd be less money floating around which means less money for your salary as your company would have less turnover, and less tax leading to lower standards of education and health services etc etc. It's a tricky one. We can't just stop all borrowing of money dead.I mean, let's take things further. If we kept borrowing at levels in the 1980s, less people would be able to afford computers which means less investment in technology so things like iPads, broadband, CT scanners, satnavs etc would all be much more expensive or non-existent for the everyday man (where relevant; don't you have a CT scanner at home?). We would probably mostly be enjoying a 1980s lifestyle still. Money makes the world go round!
You've only got to look at the moneysavingexpert forums to find pages of people who are paying down their mortgage quicker. Been trendy for a few years now, but the bank crisis and Euro probs have added a further motivation. Trackers, Offsets, daily interest calculations and how many years/interest a mortgagee can save means it's a no-brainer with savings rates so low.
I've also maxed out my pension contribution to take advantage of tax relief at the top rate. It's the only way to get my tax bill down to a less offensive level. It means I'm spending less. Mos tpeople I know are doing simialr things, so the 50% tax rate is not raising more money from me.
It is indicative that earnings failed to keep up with aspirations.
People (and govts and businesses) borrowed to buy stuff - not just to invest in appreciating or income generating assets.
Had earnings risen appreciably over the years, consumption would not have been based on easy, cheap credit.
We are all DOOOOOOOOOOOOOOOOOOOOMED
People (and govts and businesses) borrowed to buy stuff - not just to invest in appreciating or income generating assets.
Had earnings risen appreciably over the years, consumption would not have been based on easy, cheap credit.
We are all DOOOOOOOOOOOOOOOOOOOOMED
crankedup said:
More evidence of folk becoming money 'wise', can't help notice that so many do not use credit cards for shopping. We Q at the checkouts and everyone seems to be flashing cash.
The smart people use a cash back/loyalty credit card and pay the credit card bill when it arrives, thus not accruing interest, but accruing points/cash.Or a 0% for 12 months purchase credit card, whilst saving the equivalent (in the best paying savings account or mortgage offset account) to pay off at the end of the period.
crankedup said:
More evidence of folk becoming money 'wise', can't help notice that so many do not use credit cards for shopping. We Q at the checkouts and everyone seems to be flashing cash.
I always shop with my credit card, and in fact make a point of if anywhere that takes them. I do have a cashback card that I pay off monthly, though.blueg33 said:
The Group I work for has a turnover of £2bn and makes over £200m profit, but we still borrow up to 90% of the money needed for projects because that is the way to do more projects.
Credit is a vital driver in the economy
That's a cashflow issue more than a debt issue though. If credit was a little harder to come by, your company would simply do fewer projects, and make a bit less money. That's not the problem, that's pretty much exactly what businesses are supposed to use loans for.Credit is a vital driver in the economy
The big problem is when companies base their whole business model on cheap debt (Private Equity as a prime example).
I actually read that as good news. People have realised that they can't re-mortgage every year, and that their debt is too great, so they are paying it down and presumably tightening their belts elsewhere. When there were low interest rates, available credit and rising house prices, why not use some of that extra capital ahead of time, rather than having it tied up in a house?
It also shows the difference between individuals and the public sector, who seem to think it's ok to keep borrowing, even now, and have no plans to run a surplus in the life of this parliament as far as I can tell.
It also shows the difference between individuals and the public sector, who seem to think it's ok to keep borrowing, even now, and have no plans to run a surplus in the life of this parliament as far as I can tell.
AJS- said:
I actually read that as good news. People have realised that they can't re-mortgage every year, and that their debt is too great, so they are paying it down and presumably tightening their belts elsewhere. When there were low interest rates, available credit and rising house prices, why not use some of that extra capital ahead of time, rather than having it tied up in a house?
It also shows the difference between individuals and the public sector, who seem to think it's ok to keep borrowing, even now, and have no plans to run a surplus in the life of this parliament as far as I can tell.
Cutting that hard would cause the economy to collapse. They're going about as far as they can, in the hope that they can keep the level of increase in spending below the level of increase of tax receipts. It also shows the difference between individuals and the public sector, who seem to think it's ok to keep borrowing, even now, and have no plans to run a surplus in the life of this parliament as far as I can tell.
Most people I know are paying of the mortgage as quickly as possible before rates go ballistic.
I wish the rates would though.
I've no mortgage and resonable savings. Infact I live of my savings so not so much going into the economy from me these days due to low rates.
My income is less than half what it was two years ago and inflation is biting. Just as well i'm a tight
.
I wish the rates would though.
I've no mortgage and resonable savings. Infact I live of my savings so not so much going into the economy from me these days due to low rates.
My income is less than half what it was two years ago and inflation is biting. Just as well i'm a tight
.davepoth said:
Cutting that hard would cause the economy to collapse. They're going about as far as they can, in the hope that they can keep the level of increase in spending below the level of increase of tax receipts.
I don't understand what you are referring to, public or private sector spending.Because an increase in private sector spending would mean an increase in tax receipts.
The Telegraph have drawn the wrong conclusion.
Bank of England said:
"The decline in HEW – and move to injections of housing equity - since the start of the financial crisis (Chart 1) has not been associated with an increase in repayments of secured debt. Chart 2 shows that gross secured loan repayments have fallen since that time, which has reflected both lower housing market activity and a reduction in remortgaging. An article in the 2011 Q2 Quarterly Bulletin explains that the fall in housing equity withdrawal since the financial crisis is likely to reflect a fall in the number of housing transactions, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past."
http://www.bankofengland.co.uk/statistics/hew/2011/jun/index.htmGassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff