Another Bank of England warning on debt- Are we doomed?

[hyphen]

Been a few of these recently:

Bank of England warns of 'spiral of complacency' over big rise in personal debt https://www.theguardian.com/business/2017/jul/24/b...

"Over the past year, Brazier said, household incomes had grown by just 1.5% but outstanding car loans, credit card balances and personal loans had risen by 10%.

He added that terms and conditions on credit cards and personal loans had become easier. The average advertised length of 0% credit card balance transfers had doubled to close to 30 months, while advertised interest rates on £10,000 personal loans had fallen from 8% to around 3.8%, even though official interest rates had barely changed.

The past decade has seen the number of cars bought with a personal contract purchase (PCP) plan – under which the car is effectively leased – increase from one in five to four in five. Companies risk losing money if used car prices fall and Brazier said banks involved and the shareholders of car companies would “want to think very carefully about the risks”."

[hyphen]

Oakey said:

I work, my partner stays at home and looks after our son. She opened a Next account, they promptly gave her £4k of credit. fking bonkers.

That doesn't mean it is bonkers though - they based it on your income and ability to pay it off, not hers. Standard practice.

[hyphen]

Oakey said:

andy43 said:

Oakey said:

hyphen said:

That doesn't mean it is bonkers though - they based it on your income and ability to pay it off, not hers. Standard practice.

You're going to have to explain how you work that one out.

It is definitely bonkers. Untried and untested new customer is instantly given 4k of potential debt, based on some joint credit check that nobody normal understands anyway. Then people wonder why 'can't pay we'll take it away' could be on telly 24-7 and still not get round to film everybody.
BofE has been bleating about credit for a few years now but nobody appears to be doing anything about it...

There was no joint credit check, they know nothing about me. After being stung in the 2008 crash my credit score is 'Very poor' (seeing as I've not applied for credit again ever since then) so if they took anything to do with me into account that just makes it even more insane.

Fair enough on the last part. But it is not uncommon when lending unsecured credit to look at the partners profile even if not a joint credit check.

Any shared bills? Any shared bank accounts? joint mortgage? same address? Anything at all to link you on any database out there? or she may have been asked directly about her situation.

Basically they look at what they know to be true- the data shows that statistically the partner will x times out of 10 bail out the other one if it comes to it, hence they will lend accordingly.

[hyphen]

crankedup said:

hyphen said:

Oakey said:

I work, my partner stays at home and looks after our son. She opened a Next account, they promptly gave her £4k of credit. fking bonkers.

That doesn't mean it is bonkers though - they based it on your income and ability to pay it off, not hers. Standard practice.

Yes, but how many High St shops offer exactly the same type of finance, and then credit cards on top, and then a personal loan + shark money. All prey on the weak willed.

Exactly why they gave her £4k of credit, and why your credit company keep writing to you to tell you that they want to increase your limit.

Everyone has so much amount of credit they are statistically good for, the earlier a company gets in there and gets their portion the better, so at some point down the line, another store will decline his OH.

Weak Willed/low iQ are their bread and butter- everyone is on commission, from the bloke in the shop who helps you to fill in the application up to the CEO's and Investors of the finance providers.

The UK converted to UK PLC a long time ago, 5th biggest or so largest world economy heavily reliant on debt fuelled consumerism.

[hyphen]

towser44 said:

menousername said:

Oakey said:

I work, my partner stays at home and looks after our son. She opened a Next account, they promptly gave her £4k of credit. fking bonkers.

Im using "you" here in the third person sense, not at you directly....


if you can pay they win.

If you cannot - they either come after your house or they sell the debt to someone who will come after your house - they win.

House price growth = equity over mortgage = means of recourse probably 99% of the time thanks to low interest rates.

Any interest accruing could make it quite catastrophic for the account holder

How can they come after the house, the Next credit is highly unlikely to be secured it will be unsecured debt.

They can.

Secured Debt: Directly secured on your house
Unsecured: Lender applies for CCJ, second that passes or even before they can then submit an application for a Charging Order on your home. If you can't work it out and debt is over £1k, they apply for an Order of Sale and force a sale.

It is a longer process, but they can do it. The laws were recently changed to make is easier: http://researchbriefings.parliament.uk/ResearchBri...

Edited by hyphen on Tuesday 25th July 14:18

[hyphen]

So the stress test results are released today. If interest rates rose to 4% and unemployment reached 9.5%, the banks would be facing £30Bn in losses. More than expected so banks are being told to hold £10bn more in capital (on top of the £11.4Bn already ordered recently).

Guardian said:

The FPC said it had concluded that lenders “have been attributing too much of the improvement in consumer credit performance in recent years to underlying performance in credit quality and too little to the macro economic environment”.

Stress tests reveal lenders are underestimating exposure to bad debt in face of an economic downturn