approved mortgages levels fall, plus unsecured debt up..

Lotus-eater

I'm old enough to remember a year ago when much was being made of the "new world order" where we would have to pay our debts off and save to buy items we wanted.
If Gen's right and I think he is, that people still want to borrow, just they aren't being lent as much, whatever happened to our brave new world?

Generali

StevieJ wrote: »

But the OP wrote this
The article also states that personal/unsecured debt increased.

I also feel that many parts of the market are stagnant because mortgage holders don't wish to lose their low trackers and discounts.

If personal/unsecured debt is rising then it must be at the expense of other sorts of debt.

We are entering a Brave Old World where lending is finite and loans can't be sold off to others so easily.

BenL

lemonjelly wrote: »

The article also states that personal/unsecured debt increased. My opinion on this is that people are supplimenting income/ongoing costs by unsecured borrowing

Maybe the unsecured debt is to buy all those nice shiney new cars under the scrappage scheme for people who had low value older cars and the most unable to afford a new vehicle.

Cleaver

Demanufacture wrote: »

The picture going forward is far from clear, not a particularly good time to get yourself 25 years worth of debt on a mortgage, but that's just my opinion.

To be fair there isn't really any 'good time' to get yourself in 25 years of debt. My consideration as to whether to take on that debt though would be the realistic prospects of me repaying that debt through good or bad periods, my job prospects, my plans over the next 5 to 10 years and a whole host of other personal stuff. Rather than whether this is a good economic time. To be honest, now seems as good as time as any when you have no idea what life will bring over that period, you're better off looking at the factors you are in semi-control over. But I know what you mean.

lemonjelly

Generali wrote: »

If personal/unsecured debt is rising then it must be at the expense of other sorts of debt.

We are entering a Brave Old World where lending is finite and loans can't be sold off to others so easily.

Got to be a good thing IMO. This selling off of debts has always been (for me) a quirky wierd thing. From an enforceability point of view, the way in which they have been sold has circumnavigated the law (or at least the spirit of the law), so to me it says it is legal (rather than actually being legal).

kennyboy66_2

Generali wrote: »

If personal/unsecured debt is rising then it must be at the expense of other sorts of debt.

We are entering a Brave Old World where lending is finite and loans can't be sold off to others so easily.

Personal / unsecured debt is falling on a monthly basis(although on a yearly basis there is an increase of 0.7%).

I would expect the annual rate to go negative in the few months (the 3 month annualised rate is already negative)

Generali

lemonjelly wrote: »

Got to be a good thing IMO. This selling off of debts has always been (for me) a quirky wierd thing. From an enforceability point of view, the way in which they have been sold has circumnavigated the law (or at least the spirit of the law), so to me it says it is legal (rather than actually being legal).

Well the most amazing thing about selling on debt (I think at least and I only just thought about this tonight so I may be wrong) is this.

You have 2 scenarios.

Scenario 1: Bank lends money to people using deposits to do so. Bank holds 8% of deposits in reserve so £1,000,000 increase in money stock becomes £12,500,000 increase in money supply due to fractional reserve banking.

Scenario 2: Bank lends money to people using deposits to do so and then sells on the debt via CDOs. The highest tranche of the CDO is bought by another bank and used as reserves so more money can be lent.

This is a neat way of circumventing the reserve rules set by regulators in a manner agreed to by the regulators. If you keep the debt asset on your own books you need to hold reserves against the debt. If you sell the debt on then the debt not only goes off your books but can also be used as an asset in reserve to lend against!

I probably didn't explain that so well as I only just realised it.

Crickey.

kennyboy66_2

Generali wrote: »

Well the most amazing thing about selling on debt (I think at least and I only just thought about this tonight so I may be wrong) is this.

You have 2 scenarios.

Scenario 1: Bank lends money to people using deposits to do so. Bank holds 8% of deposits in reserve so £1,000,000 increase in money stock becomes £12,500,000 increase in money supply due to fractional reserve banking.

Scenario 2: Bank lends money to people using deposits to do so and then sells on the debt via CDOs. The highest tranche of the CDO is bought by another bank and used as reserves so more money can be lent.


.

CDO's wouldn't be counted towards Tier 1 capital although could be counted towards Tier 2 in some circumstances.

However in Scenario 2, surely the bank has just swapped cash for a higher risk CDO.

I don't believe this changes there reserves in a meaningful way.

Generali

kennyboy66 wrote: »

CDO's wouldn't be counted towards Tier 1 capital although could be counted towards Tier 2 in some circumstances.

However in Scenario 2, surely the bank has just swapped cash for a higher risk CDO.

I don't believe this changes there reserves in a meaningful way.

Could the AAA tranche not be held as Tier 1 capital? When it was Tier 1 before the credit ratings guys changed their minds that is.

kennyboy66_2

I thought Tier 1 was basically;

Shareholders equity
Shareholders premium
Retained earnings
Preference share equity (?)

A pretty tight definition.

Tier 2 is a bit looser & I think different asset classes have risk weightings attached to them to evetually calculate a figure.