UK Banks and Building Societies write off £20 million pounds a day

Ingsy

Thrugelmir wrote: »

Average household debt in the UK is ~ £8,556 (excluding mortgages).

That's incredible.

lemonjelly

Masomnia wrote: »

'£8,556 (excluding mortgages).' That's staggering.

Actually, that is small fry to those in my line of work.
Anecdotal conversation between 2 debt caseworkers in the kitchen recently - one stated that a case isn't interesting to them unless the total debt exceeds £100k. That used to happen once a year, now it happens once a month (per caseworker).

Loughton_Monkey wrote: »

But with typical interest of 16.9%, you have to be desperate!.

Typical APR is dependent on circumstances. Most people being awarded credit are likely to have a typical APR around 21-22%.

Loughton_Monkey wrote: »

If you exclude the handful of people who have perhaps been 'forced' to max out the plastic because of a specific 'emergency', then I can never work out which is the most 'criminal'. 1. Consistantly to spend more than your income, or 2. Having decided to do so, to pay 16.9% for the privilege.

This was, of course, not easily achieved in, say, the 40's/50's who despite their poverty, perhaps had more brains. One wonders if they had had pawnbrokers on every street corner, whether it might have been the same. I doubt it though.

This is rose tinted glasses nonsense. The 40's & 50's had debtors too you know. Yes, debt was viewed differently back then, and was less accessable, but people in the 40's & 50's did do daft things with money, lost money, spent more than they had, in the same way as others saved what they could.

Thrugelmir wrote: »

The general level of debt is the issue not just the rate of interest charged.

Partially agreed. The interest rate can make a big impact on the affordability of repayments. It can also mean that the debt is in existence for a lot longer, therefore does affect the affordability of the credit.

It is not uncommon for caseworkers to establish that circa 50% of the debt relates to interest payments, and the old nugget of charges (eg for admin costs etc).

satchmeister

UK Banks and Building Societies write off £20 million pounds a day

Insignificant amount compared with the gains they are making from savers' low interest rates, eg HSBC online bonus account Variable rate of 0.75% AER (0.75% gross including bonus interest), when you don't make a withdrawal. If you do need to withdraw, you won't get bonus interest, but you'll still get 0.25% AER (0.25% gross).

Really2

Graham_Devon wrote: »

I only picked up on your post because it was misleading to suggest rates people pay now and no different to rates when base rates were higher. You based it on new loans available now, rather than the debt people hold now, which is totally misleading.

People still take on debt it is very relevent to future affordability. (and as debt get paid of new debt gets added)
If they took out loans at a higher rate and that have fallen back (eg mortgages) that should mean there is some slack there for rate increases.

I like to use like for like as it is fairly easy to do that is all, I can't work out what the mortgage paying UK are paying as a whole but still nearly half are fixed rate.

Your comment on personal loans were that they were taken out on a previous fixed rate(6%), so in that case if rates went up that debt would not suddenly become more expensive to service. Irrelevent basically

lemonjelly

Masomnia wrote: »

'£8,556 (excluding mortgages).' That's staggering.

Ingsy wrote: »

That's incredible.

Maybe I have just become accustomed to it, but why is this incredible?
Think about it. Unsecured credit can be for a car. With all the credit costs, insurance/PPI etc, the total cost of the credit can be quite high, as the debtor borrows the full total in advance (therefore a £15k car can cost £21k). The debtor usually looks solely at the £265per month repayments though.

Most credit cards have starting limits of £5k, & these are easy to increase. How many people have only one credit card?

Think also about the amount of stuff you can buy via credit - either by card, or loan, or whatever.

In all honesty, if a person came to see me at work with debts of £8556, I would be advising them that in my experience, that is small fry.

Thrugelmir

chewmylegoff wrote: »

£2,500 debt payment per year for a household including mortgage interest is sod all really.

That's an interesting view in a time of incomes being squeezed from different directions.

chewmylegoff

satchmeister wrote: »

UK Banks and Building Societies write off £20 million pounds a day

Insignificant amount compared with the gains they are making from savers' low interest rates, eg HSBC online bonus account Variable rate of 0.75% AER (0.75% gross including bonus interest), when you don't make a withdrawal. If you do need to withdraw, you won't get bonus interest, but you'll still get 0.25% AER (0.25% gross).

banks like HSBC are only benefiting from this because people are stupid enough to actually put money into their terrible savings products. it is possible to get 3% at the moment, instant access, so why would anyone choose to put it in HSBC?

further, 3 month libor is at about .75%, if HSBC can secure all of the lending they need at libor rates, it would be a bit silly of them to start offering you 6% on your savings, they are a business after all.

chewmylegoff

Thrugelmir wrote: »

That's an interesting view in a time of incomes being squeezed from different directions.

£2,500 of interest over a year is peanuts unless you have an extraordinarily low income, given that it includes mortgage interest and therefore the lion's share of housing costs.

although i revert to my previous point which is that these average numbers tell you nothing about the segment of society which is actually feeling the squeeze, as the bottom 10%, say, are likely to be spending a lot more than 15% of their net income on debt repayments.

Graham_Devon

chewmylegoff wrote: »

£2,500 of interest over a year is peanuts unless you have an extraordinarily low income, given that it includes mortgage interest and therefore the lion's share of housing costs.

Feel free to send a couple of peanuts my way in that case

Masomnia

lemonjelly wrote: »

Maybe I have just become accustomed to it, but why is this incredible?
Think about it. Unsecured credit can be for a car. With all the credit costs, insurance/PPI etc, the total cost of the credit can be quite high, as the debtor borrows the full total in advance (therefore a £15k car can cost £21k). The debtor usually looks solely at the £265per month repayments though.

Most credit cards have starting limits of £5k, & these are easy to increase. How many people have only one credit card?

Think also about the amount of stuff you can buy via credit - either by card, or loan, or whatever.

In all honesty, if a person came to see me at work with debts of £8556, I would be advising them that in my experience, that is small fry.

If we're talking about an individuals finances then of course it is small fry as you put it, but for an average across all households in the UK I still think it's pretty shocking.