Friday, Jul 04, 2008
Vicious circle turns ever faster ...
The Times: Families turn to loans and credit cards to cover mortgage bills
"More than four million households have resorted to personal loans or credit cards to cover mortgage or rent payments in the past year. The financial comparison site Moneysupermarket.com said that many more homeowners could be sucked into a spiral of servicing long-term debt with expensive short-term borrowing when about £30 billion of mortgage deals come to an end this month."
Nothing new, but all good evidence to support the reassuring thought that the HPC will be short sharp and steep.
Posted by mark wadsworth @ 12:49 PM (1037 views) Add Comment
24 Comments
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1. martin said...
"It pointed out that homeowners who take a personal loan to repay a mortgage, but lie about the reason, risk being charged with fraud."
Yeah, like thats gonna happen. Anyway, i'm new to this site so go easy on me here. As far as i'm concerned all these fools that have borrowed money, used credit cards, and taken out massive mortgages when credit was cheap and easy to get have themselves to blame for the trouble they are now facing. It seems pretty basic to me that when you borrow money, you should pay it back (sounds simple and straight forward to me). If you over stretch yourself then who is to blame, if you lie about your reasons for personal loans, then you are again to blame. Let the fools lose the straws they grasped at as they reflect on their "Live for the now" attitude.
Their loss will be our gain, sounds a bit harsh but we're heading into times where we all have to look after ourselves and our own families because no-one else will.
2. inbreda said...
Martin - welcome to the site.
Don't worry about being shot down, your views seem to be pretty uncontentious relative to the views of the majority on this site.
3. i remember the 90`s said...
Welcome martin, i`ve only posted a few myself and yours is quite tame by the standards set here, it will be dog eat dog soon ,i have a member of family who i am certain is doing just as this article suggests but of course they bottle it up and would not listen to my ramblings more than two years ago so its too late now its just a matter of time before they will be bankrupt still i managed to save one member who did.
4. seanb303 said...
welcome martin
i think it's people giving in to social pressure,keeping up with the joneses ,nagging missus and a steady fall in real income
due to fudged cpi
5. mark wadsworth said...
Hee hee, it's now the Joneses who trying to keep up with Mr & Mrs W, they are all kicking themselves that they didn't sell to rent in 2007.
6. cornishman said...
I think a lot of problems come from the use of the phrase 'Mortgage Equity Withdrawal". Sounds quite tame. Sounds like you are just withdrawing some of your equity.
Whereas what you are actually doing is borrowing some money - and promising to pay it back at some point - with interest. Whatever happens to house prices or your job/income.
7. techieman said...
Cornish there is no such thing as Mortgage Equity Withdrawal. The only time when you can Withdraw your equity is by cashing in. At all other time how much equity you have is a speculation which could under (or to be fair over) estimate your Actual equity. A gain or loss is only a paper one until you liquidate it.
8. cornishman said...
techieman@ 1.45pm
wasn't that the gist of what I was saying?
I don't appear to be expressing myself very clearly today. Got taken the wrong way earlier on too...
9. techieman said...
cornish - dont be so sensitive :-)- yes i realise that was what you were alluding to, and i thought i was just clarifying what you meant! Equity Withdrawal will turn out to be a poision chalice in this country - as you say they have:
1. Spent the money
2. Have to pay interest on the loan
3. Might very well end up not having had the equity to withdraw after all!
All good fun when you think you have rampant HPI and loads of Equity but now..... scary stuff.
10. uncle tom said...
Welcome Martin,
You would probably appreciate a little quote from Charles Dickens 'David Copperfield' which has always served me well:
Mr Micawber:
"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
11. debtfree said...
using credit to pay off .... credit.
absolute bonkers.
bit like feeding someone heavily salted corn flakes with no milk to solve their dehydration problem.
12. martin said...
Uncle Tom:
"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
The quote is spot on, however with the lifestyle the sheeple(tm) have been enjoying I think the "annual expenditure" would be closer to fifty pounds if not more and the up coming result of not only misery but an increase in suicides, as demonstrated by one of my poor neighbour just 2 weeks ago.
13. Orwell said...
debtfree,
That is a good analogy.
14. This comment has been removed as it was found to be in breach of our Blog Policies.
15. a saver said...
Martin @ 1. we're heading into times where we all have to look after ourselves and our own families because no-one else will.
Well that would be a change - do banks that lend recklessly and can't finance their debts have to find the dosh themselves (or even hand back bonuses?) or put up the funds for the improved deposit protection scheme? The taxpayer rescues just about everyone who's reckless, including buying overpriced properties for DHSS tenants from greedy builders and BTLs who didn't see HPC coming and can't sell.
16. last_days_of_disco said...
@martin
Welcome! I think you are very sweet and gentle.
The people who have cared for themselves their whole lives and even built their selfish pride on debt are now in for payback time.
My colleague and I have a plan to go and acquire a BMW for a 1000 pounds each when this hits fully. We have the *cash* ready.
We are ready to take full advantage. Distressed sellers will be *everywhere*.
Cash will be king.
17. icarus said...
martin @1 - yep, but on this site we tend to blame the lenders too.
18. harold said...
cornishman - not to worry, my Bach is worse than my byte ;o)
19. martin said...
@ Last Days Of Disco
"Welcome! I think you are very sweet and gentle."
Dont mum! I told you not to talk to me like that in front of my friends ....... tut!!
20. wealthyvagrant said...
Ahhhhh but it's worse than that....
Going bankrupt isn't what it used to be. For some people it may be the best option and as they say, there's no point going bankrupt for £50k when you can do it for £150k
Taking out personnal loans at this stage for someone deep underwater carries no extra consequence.
From Wikipedia;
"Following the introduction of the Enterprise Act 2002, a UK bankruptcy will now normally last no longer than 12 months and may be less, if the Official Receiver files in Court a certificate that his investigations are complete.
It is expected that the UK Government's liberalisation of the UK bankruptcy regime will increase the number of bankruptcy cases; initial Government statistics appear to bear this out.[citation needed]"
Sure you mind find it hard to get a mortgage for a few years but by the time houses start to pick up again, all will be forgotten.
Scary.
I'm not sure the £ can survive this.
21. wealthyvagrant said...
Disclaimer - my comment above - @18 should not be considered as financial advice, I don't know if what I posted is accurate. Do your own research.
:)
22. it_is_going_with_a_bang said...
19.
Thats exactly how people see it. Thats just how silly and abundant credit has become.
If i went out tomorrow and spent all my credit card limits i could spend £120k - just on credit cards.
Now take into account that fact that it doesnt really make a difference if you owe £10k or £120k if you are never going to pay it back.
If you really are going bankrupt then make it worth while.
Buy the things you think u may want over the next few years - stash it away indifferent names etc and away u go.
This is no new thing. People have done it for years and years. The only difference is the rather stupid credit lines and limits people have - including myself.
23. martin said...
@18
Agreed, the problem for all is that when the s**t hits the rather large fan, all will get a bit of a covering. So when we go into a bank with realistic financial applications, all will be looked on as evil criminals with alterier motives by the spotty 18 year old idiot behind the advice desk.
As Last Days 14, cash will be king if the £ survives.
24. inbreda said...
18. wealthyvagrant said...
"Following the introduction of the Enterprise Act 2002, a UK bankruptcy will now normally last no longer than 12 months and may be less,
And don't you know it - that really p*****S me off. I've been waiting for 5 years to get a house tolive in - and those speculator morons will be off the hook in 12 months. Reality is very cruel.