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

Thrugelmir

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.

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.

From the full article.

A YouGov survey for the Institute of Financial Planning found that 43% of people worry about money “more often than not” and 17% worry about it “all the time”. Strikingly, the survey also found that

[FONT=Arial,Bold][FONT=Arial,Bold]47% of respondents found it difficult to make their money stretch to their next payday[/FONT][/FONT], and 25% never set out a clear budget. Legal and General’s MoneyMood Survey has revealed that around 11.5 million homes, half of UK households, are budgeting on a fine line between managing to pay bills and sinking into debt. 30% of households had to find extra money to pay for unexpected bills each month, at an average cost of £178.

Debt affects all levels of society. Just because you earn a high salary doesn't mean you can manage it any better, than someone who earns little.

satchmeister

chewmylegoff wrote: »

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.

3% is still way below the level of inflation, seems £200bn goes a long way ... for the banks. If they were a real business they would have been bankrupt.

Thrugelmir

chewmylegoff wrote: »

further, 3 month libor is at about .75%, if HSBC can secure all of the lending they need at libor rates,

Majority of HSBC funding comes from wholesale and retail deposits in Asia and the Far East.

Not from the likes of Barclays, Lloyds or RBS at 3 mth LIBOR.

blueboy43

Thrugelmir wrote: »

December 2010 - Debt Statistics



15% of income to serice debt, and thats at current interest rates. If rates were to rise to more normal levels what would the impact be?

Average credit card rates in 2010 were higher than any year since 1998.

The real problem is that the total level of personal debt (ex. mortgages) has more than doubled in a decade.

The majority of this growth was between 2000 and 2005

chewmylegoff

Thrugelmir wrote: »

From the full article.



Debt affects all levels of society. Just because you earn a high salary doesn't mean you can manage it any better, than someone who earns little.
[/LEFT]

i don't actually understand what point it is that you're trying to make. it is that 15% of income on mortgage interest + other debt interest is massive and unsustainable and we're all doomed?

the point i'm trying to make is that the numbers are too high level and lack sufficient detail to actually mean much, and that an average of 15% is not very high but it doesn't tell the true story as a lot of the debt is most likely concentrated into a (significant) minority of the population.

michaels

Where shall I start:

1) As noted above the interest rates payable on unsecured lending have low (approaching zero) correlation with the BOE base rate as they are made up of about 3% cost of funds and 17% default premium / profit margin. When interest rates start to increase it will presumably be because the economy is stronger at which point default rates should be falling (stringer economy, more overtime, less redundancies etc) so there is no expectation that unsecured lending rates will increase.

2) 216bn of unsecured debt, 9.9bn of write offs. I don't know what the average interest rate payable on the debt is but at anything over 7.6% (3% cost of funds plus 4.6% default rate) the banks are still making a profit which I find quite remarkable for a recession - surely lending should be a cyclical business - if there are still large positive returns being made in the depths of a downturn then there is something very wrong with the amount of competition in the industry.

3) Total lending grew by 0.8% in 12 months. Average earnings grew by 2% in the same period so debt as a proportion of GDP fell sharply. Personally this is a frightening statistic but not in the 'debt is bad' category but in the consumption is falling growth (and thus interest rates) are likely to be constrained category.

How can people look at the facts and draw almost completely the opposite to the correct conclusion?

chewmylegoff

Thrugelmir wrote: »

Majority of HSBC funding comes from wholesale and retail deposits in Asia and the Far East.

Not from the likes of Barclays, Lloyds or RBS at 3 mth LIBOR.

the point is that they can borrow at libor if they want to, so they don't need to offer rates of more than libor.

chewmylegoff

satchmeister wrote: »

3% is still way below the level of inflation, seems £200bn goes a long way ... for the banks. If they were a real business they would have been bankrupt.

3% may be below inflation, but what does that have to do with anything? banks don't have some kind of obligation to pay you interest at above inflation.

and why would HSBC be bankrupt?

satchmeister

chewmylegoff wrote: »

3% may be below inflation, but what does that have to do with anything? banks don't have some kind of obligation to pay you interest at above inflation.

and why would HSBC be bankrupt?

Maybe not HSBC but they have been helped indirectly, N Crock, B&B, Lloyds ... would all have gone under which is why the government had to bail then out - Financial Stability £85.5Bn in 2008 2009. They dont have an obligation to pay interest at above inflation but we have an obligation to bail them out so they can still get bonuses - makes clear business sense.

purch

Average credit card rates in 2010 were higher than any year since 1998

I am sure you can provide some evidence to back that up.