Reckless lending got us into this and more will get us out?

Reaper

beingjdc wrote: »

as of January 2009 we are, as a nation, in *more* mortgage debt than we were in January 2008.

I'm quite surprised to hear that as recent stories seem to be saying people have been doing lots of overpayments to get the debt down. Have you got a link I can follow to the stats?

mystic_trev

Reaper wrote: »

I'm quite surprised to hear that as recent stories seem to be saying people have been doing lots of overpayments to get the debt down. Have you got a link I can follow to the stats?

http://www.creditaction.org.uk/debt-statistics.html

ad9898_3

All I can say is when a bubble has burst, it's futile to try and repair it, then try and inflate it again, regardless of how tempting it is to try. The facts are is a 'repaired bubble' is likely to burst again much sooner.

Its life, the bubble has burst, we need to move on, the credit that as been available through extremely poor lending practises has gone, forget it, it's no use crying over spilled milk, Brown and Greenspan could have put a stop to this in 2003, they didn't, and these are the consequences.

The only thing you can do is pick up the pieces and learn the lesson. What Brown is trying to do is make things better in the short term, but all he will be doing is storing it all up for someone else to sort out in the medium to long term, when he's gone the way of the dodo.

beingjdc

Reaper wrote: »

I'm quite surprised to hear that as recent stories seem to be saying people have been doing lots of overpayments to get the debt down. Have you got a link I can follow to the stats?

http://www.bankofengland.co.uk/statistics/li/current/

specifically

http://www.bankofengland.co.uk/statistics/li/2008/Dec/tablec.xls

See "Net Lending secured on Dwellings" - a positive number for every month of 2008.

Reaper

Thanks for the stats guys. I was struggling with the "Credit Action" one as the presentation is designed more to make a point than give easy comparisions. Eventaully I found the same report they did last year as it was the only way to make sense of it.

If I read the stats right direct mortgage lending has dived:

Gross mortgage lending reached an estimated £12.6 billion in December, down 11% from £14.2 billion in November and 47% on December 2007, according to the Council of Mortgage Lenders. This is the lowest monthly figure since April 2001.

However it seems that it is more than being made up for by secured loans.

Added together there has been 3.3% increase in secured lending, so slightly above inflation (depending which measure you use).

I must say I'm surprised. Maybe people losing jobs are taking out secured loans to get by? If so they are storing up trouble.

Right, better go and do some work. Much easier than trying to make sense of stats.

Wookster

Rochdale_Pioneers wrote: »

Its all very well saying "too much debt". But efficient profitable businesses often have to borrow to invest - take that away and they stagnate and decline. In some cases this takes a few years - MG Rover's failure to invest in new cars for example - in others it happens quickly as cash flow dries up and quickly become a fatal crisis.

This is a prime example of exactly the sort of lending anyone should steer far clear of. How long do you think it takes to develop a new car? I'm no engineer but I'd guess over 5 years. Are you seriously suggesting that the tax payer should finance this sort of activity?

MG Rover should have been developing new models as a matter of course. It didn't and therefore failed. That's the way capitalism works unless you want to keep propping up failing businesses indefinitely.

Rochdale_Pioneers wrote: »

Noone is suggesting a return to 125% mortgages and borrowing billions on the global wholesale market to lend to dam construction projects in Arabia. But to stop lending completely is a surefire way of killing an economy dead. There seems to be a phalanx of economists all around the world looking at the problem of lack of credit killing demand killing industry and how to get credit and demand moving again. Once again you position yourself at odds with the reality on the ground and with the consensus about what is wrong.

Well it seems a return to 90% mortgages is back on the cards. Northern Rock has been instructed to offer "market leading" products at the behest of Crash. AFAIK 90% mortgages are quite rare these days, do you think its right to be so bullish with tax payers money? Especially in a falling market?

(more info here: http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-ninety-per-cent-mortgages-courtesy-of-the-taxpayer-1630413.html)

Reckless is the word that comes to mind.

beingjdc

Reaper wrote: »

If I read the stats right direct mortgage lending has dived:

Gross mortgage lending is down substantially - it is around the levels of 2001-2002 - which I, and many others, regard as "back to normal" as opposed to the political class who believe that 2004-7 would be "back to normal", and the current levels are the anomaly.

But net mortgage lending is still well above zero - we are borrowing more than we are paying back. So, while borrowing is growing less quickly, it is still growing. We owe more today than we did 12 months ago. New credit supply has been crunched, but total credit outstanding has not.

Conrad

I'ts simply a question of the least worst outcome.

If the Government do not intervene, we will get a severe deep depression where millions of ordinary folk lose thier pension wealth, assets and jobs. Only a few cash rich, debt free individuals would benefit at the carcass.

boyse7en

Foward credit is very important to many seasonal businesses (and many more businesses are seasonal then you might think) otherwise they will cease trading almost immediately, even if they are well-established and profitable.

If the banks simply use the money provided by the taxpayers to shore-up their own balance sheets it will result in an increase in successful businesses going under.

Wookster

Conrad wrote: »

If the Government do not intervene, we will get a severe deep depression where millions of ordinary folk lose thier pension wealth, assets and jobs.

And how do you think government intervention is going to stop this?

So far none of the bailouts have achieved anything like their intended results aside of the Bank Bailout Part I which simply kept the banks alive (for now).