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Over-indebtedness in britain
lemonjelly
Posts: 8,014 Forumite
Interesting report by BIS, following on from a first report issued in 2005.
Couple of points I'd highlight:
1 in 5 are using one form of credit to pay off another form of credit
Demand for credit is strong
1 in 10 households are in structural arrears - peaking between Oct 09 - Feb 10
1 in 12 are paying 30% of their income on debt repayment. 1 in 8 are spending 20% on the same.
15% feel that sustaining repayments & household commitments is a heavy burden.
Increased number of people are over-indebted.
Only 14% have approached professional help to resolve the debt problems they have.
Full report is here:
http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/10-830-over-indebtedness-second-report.pdf
Interesting reading. Made me think, we have loads of people banging on about the government needs to sort its own house out, cut the debt etc etc. Don't a lot of us need to do that on a personal scale too?
It also doesn't paint a rosey picture. & of particular concern, we have seen IR's for personal borrowing increasing. Wages aren't going to rise (by much), so there could very well be a big risk that the debt burden could become more oppressive. Most indicators have increased at a time when IR's are at historic lows.
Thoughts...?
Couple of points I'd highlight:
1 in 5 are using one form of credit to pay off another form of credit
Demand for credit is strong
1 in 10 households are in structural arrears - peaking between Oct 09 - Feb 10
1 in 12 are paying 30% of their income on debt repayment. 1 in 8 are spending 20% on the same.
15% feel that sustaining repayments & household commitments is a heavy burden.
Increased number of people are over-indebted.
Only 14% have approached professional help to resolve the debt problems they have.
Full report is here:
http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/10-830-over-indebtedness-second-report.pdf
Interesting reading. Made me think, we have loads of people banging on about the government needs to sort its own house out, cut the debt etc etc. Don't a lot of us need to do that on a personal scale too?
It also doesn't paint a rosey picture. & of particular concern, we have seen IR's for personal borrowing increasing. Wages aren't going to rise (by much), so there could very well be a big risk that the debt burden could become more oppressive. Most indicators have increased at a time when IR's are at historic lows.
Thoughts...?
It's getting harder & harder to keep the government in the manner to which they have become accustomed.
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Comments
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The Government should be doing more to educate people, encouraging people to save and tighetening financial regulation.
Too many people, I feel, lack the responsibility to handle money. Like the bankers. We have a lot of people who are gambling with their futures borrowing too much money to buy homes, BTL's etc. Constantly looking for ways to break the rules.
The other day there was a thread where an individual had savings (a deposit for his house) of £25k and unsecured debts of £22k. Just couldn't understand why lenders wouldn't lend him any money. As far as he was concerned these were 2 seperate pots. Living in a fantasy illusory world.......0 -
Debt doesnt matter.
What matters is resposibility.0 -
lemonjelly wrote: »
Thoughts...?
I think credit has been too easy (and still is), and if you couple this with many peoples lamentable understanding of interest rates and the effect of compound interest, then the results are inevitable.
I think once people get to a certain level of unsecured debt compared with their income, then it is fiendishly difficult to dig themselves out of the hole.
I can't imagine what it must feel live to pay say £400 a month on credit card debts or unsecured loans (say on £20k's worth) and barely dent the total sum owed.US housing: it's not a bubble
Moneyweek, December 20050 -
kennyboy66 wrote: »I can't imagine what it must feel live to pay say £400 a month on credit card debts or unsecured loans (say on £20k's worth) and barely dent the total sum owed.
It must feel like living in the mind of a very stupid person.0 -
kennyboy66 wrote: »I think credit has been too easy (and still is), and if you couple this with many peoples lamentable understanding of interest rates and the effect of compound interest, then the results are inevitable.
I think once people get to a certain level of unsecured debt compared with their income, then it is fiendishly difficult to dig themselves out of the hole.
I can't imagine what it must feel live to pay say £400 a month on credit card debts or unsecured loans (say on £20k's worth) and barely dent the total sum owed.
I agree. Since I started this line of work the explosion in availability of credit, lack of responsibility by creditors & borrowers, lack of understanding of financial products & services, and avarice have overtaken unforeseen changes of circs as the cause of indebtedness.Thrugelmir wrote: »The Government should be doing more to educate people, encouraging people to save and tighetening financial regulation.
Too many people, I feel, lack the responsibility to handle money. Like the bankers. We have a lot of people who are gambling with their futures borrowing too much money to buy homes, BTL's etc. Constantly looking for ways to break the rules.
The other day there was a thread where an individual had savings (a deposit for his house) of £25k and unsecured debts of £22k. Just couldn't understand why lenders wouldn't lend him any money. As far as he was concerned these were 2 seperate pots. Living in a fantasy illusory world.......
I agree wholeheartedly - which is why I have started a seperate thread on that very subject!;) http://forums.moneysavingexpert.com/showthread.html?t=2361423It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
Thrugelmir wrote: »The other day there was a thread where an individual had savings (a deposit for his house) of £25k and unsecured debts of £22k. Just couldn't understand why lenders wouldn't lend him any money. As far as he was concerned these were 2 seperate pots. Living in a fantasy illusory world.......
I saw a thread ages ago where a woman was asking how to get the HPI out of her house. It had 'gained' £20k and she wanted that £20k to spend on stuff.
She couldn't quite grasp that she would have to sell her house or remortgage to get at it. Unbelievable!"I can hear you whisperin', children, so I know you're down there. I can feel myself gettin' awful mad. I'm out of patience, children. I'm coming to find you now." - Harry Powell, Night of the Hunter, 1955.0 -
kennyboy66 wrote: »I think credit has been too easy (and still is), and if you couple this with many peoples lamentable understanding of interest rates and the effect of compound interest, then the results are inevitable.
I think once people get to a certain level of unsecured debt compared with their income, then it is fiendishly difficult to dig themselves out of the hole.
I can't imagine what it must feel live to pay say £400 a month on credit card debts or unsecured loans (say on £20k's worth) and barely dent the total sum owed.
The criteria for borrowing has changed noticably in the past 18 months. If for no other reason than the lenders taking high risks have left the market, sold out their loan books or been taken over.
Many people haven't yet comprehended that the rules have changed. As until they try and remortgage, move house , obtain consent to let they won't be aware.
The concern must be at the moment that while people adjust to a higher petrol prices, no pay rise and an increased cost of living. That the day of a rise in interest rates draws nearer.
After a year now, most people with mortgages have enjoyed historically low mortgage rates (even those on 6% aren't high in real terms). So there's a major hit heading that people may find hard to absorb.0 -
lemonjelly wrote: »Demand for credit is strong
Reading that report.. just a note on my credit-revulsion theory. It was always focused on those who remain in the position of being able to exercise a choice, on whether they feel it's a good idea to borrow.
I was not including those who look at credit as a lifeline because otherwise they have are struggling with money, or as possible free money to default on later. Of course there will be demand from increasingly desperate people for credit - but that doesn't mean it's always a good idea to satisfy that demand for credit for the lender or the would-be borrower.The aggregate data masks substantial differences in expectations among certain sections of the population. Lone-parent households were more likely than others to say that they were fairly or very likely to need to borrow more money (29%), as shown in Figure 4.13, as were the households of younger respondents (25% of those age 18-24) and households in which the respondent and/or partner was unemployed (24%).
There was, however, an inverse relationship between income and the likelihood of needing to borrow more – low-income groups were more likely to say that they might need to borrow more. This is the reverse of the association seen for credit applications, highlighting perhaps the difference between a ‘need’ for credit and exercising a choice to apply for different products.0 -
I agree with you dopester.
This is something I put on a seperate thread, which I think people are missing in their thinking all is back to normal:Looking at the level of debt is a red herring.
It is ability to service that debt which is important.
With NI's & other such taxes increasing year on year, is everyone sure that the levels of debt repayments are sustainable.
I would vouch that many people I see are not able to sustain their debt repayments. Indeed the governments own report on indebtedness shows that this situation has got worse in the last 5 years.
Most of those 5 years have been so-called "good times". As we are undoubtedly approaching times where credit is likely to cost more, & disposable income is likely to fall, I'd argue it is realistic to have concerns regarding the unsustainability of this debt.
Read more here http://forums.moneysavingexpert.com/...html?t=2361453
(Personally, personal debt has been unsustainable for way over 10 years, but that is my opinion only).It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
Many people haven't yet comprehended that the rules have changed. As until they try and remortgage, move house , obtain consent to let they won't be aware.
There are quite a few on the other homes forum on here that are starting to wake up to the nightmare.0
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