Finances and debt worsen

Graham_Devon

A far cry from what we hear on here. Debt is increasing, not reducing. Income is reducing, not increasing.

The outlook for household finances has hit a six-month low, with debt levels up for the seventh month in a row and the appetite for major purchases markedly weakened, says research company Markit.

Nearly 37% of respondents to the monthly Markit Household Finance Index said their household finances had worsened in October, with just 7% reporting an improvement, indicating a much faster deterioration than was seen throughout 2010 and in the second half of 2009.

Debt has risen for seven consecutive months – the longest such period since the survey began in February 2009. Only those in the survey's highest income group, earning over £58,000 a year, saw an overall decline in debt. Public sector workers reported rising debt, while the borrowings of those in the private sector stabilised.

Tim Moore, senior economist at Markit, said: "Household finances were once again gripped in a vice of subdued real incomes and heightened job insecurity in October. Weak labour market conditions, combined with the elevated inflationary pressures, have made rising debt and falling willingness to spend recurring themes this year. October was no exception, with these unwelcome trends especially prevalent among public sector employees and the lowest income groups."

Income from employment dropped for the 13th consecutive month, with public sector workers reporting the sharpest reduction in their pay since March.

So I suppose really all thats left is to find something wrong with the survey!

http://www.guardian.co.uk/business/2011/oct/24/household-finances-debt-october?newsfeed=true

RenovationMan

"Nearly 37% of respondents to the monthly Markit Household Finance Index said their household finances had worsened in October, with just 7% reporting an improvement, indicating a much faster deterioration than was seen throughout 2010 and in the second half of 2009."

I've never heard of Markit Household Finance Index, does anyone know how they collect their stats?

EDIT> I found this on their website:

"The survey is based on monthly responses from over 2,000 households, with data collected from a representative panel of respondents. The panel is structured according to income, region and age to ensure the survey results accurately reflect the true composition of the UK population. Results are also weighted to further improve representativeness."

So we have a survey based on 'over' 2000 people extrapolated up to cover the UK population. Even Shelter have a better survey population than that.

wotsthat

Graham_Devon wrote: »

A far cry from what we hear on here. Debt is increasing, not reducing. Income is reducing, not increasing.

So I suppose really all thats left is to find something wrong with the survey!

http://www.guardian.co.uk/business/2011/oct/24/household-finances-debt-october?newsfeed=true

There's nothing wrong with the survey. It would be a mistake though to take it's results in isolation in forming an opinion.

DervProf

There you go Graham, as requested.

BTW, The results of this survey do not suprise me, even if it is just a small sample of the population. I get a similar message talking to friends, family and clients.

Really2

Graham_Devon wrote: »

A far cry from what we hear on here. Debt is increasing, not reducing. Income is reducing, not increasing.

HEW being negative for 3 years seems to hint people are repaying debt.


Average wage increases are from ons data which I think is 2000 companies PAYE data.

Is it not when asked for opinion on their situation people may overstate it in good and bad times?

Wages have increased but they are not matching inflation at the moment, but not sure who has been saying they have outpaced inflation.

I think anyone could work out how HEW can be repaid yet total mortgage debt can increase as a nation.

IMHO data should hold more weight than opinion. But nothing stopping you believing this is more true.
I prefer data over surveys, but surveys can give a good idea of sentiment.

ManAtHome

Credit Action stats lend some support http://www.creditaction.org.uk/helpful-resources/debt-statistics.html particularly if you take the write-offs into account.

Really2

ManAtHome wrote: »

Credit Action stats lend some support http://www.creditaction.org.uk/helpful-resources/debt-statistics.html particularly if you take the write-offs into account.

Mortgage debt is increasing due to new purchases, if people were not buying it would be falling around £6bn a quarter in overpayments alone, never mind redemptions.

I should imagine total debt will carry on increasing on the credit action stats as long as the population keeps growing.

Looking at their average combined debt figures though it shows falls.

Jan 11
Average household debt in the UK is ~ £57,706 (including mortgages).
Average household debt in the UK is ~ £8,495 (excluding mortgages)

October 11
Average household debt in the UK is ~ £55,822 (including mortgages)
Average household debt in the UK is ~ £8,042 (excluding mortgages)

Odd that people are reporting rising debt but on average it seems to be falling.

Thrugelmir

Really2 wrote: »

Looking at their average combined debt figures though it shows falls.

Jan 11
Average household debt in the UK is ~ £57,706 (including mortgages).
Average household debt in the UK is ~ £8,495 (excluding mortgages)

October 11
Average household debt in the UK is ~ £55,822 (including mortgages)
Average household debt in the UK is ~ £8,042 (excluding mortgages)

Odd that people are reporting rising debt but on average it seems to be falling.

£3.5 billion pounds of unsecured debt is written off every year.

So balance outstanding needs to be viewed over a longer time frame.

chewmylegoff

Thrugelmir wrote: »

£3.5 billion pounds of unsecured debt is written off every year.

So balance outstanding needs to be viewed over a longer time frame.

surely unless the rate of write-off is changing it doesn't really matter?

Really2

Thrugelmir wrote: »

£3.5 billion pounds of unsecured debt is written off every year.

So balance outstanding needs to be viewed over a longer time frame.

What were those figures like in 2007?

But it is hard to argue that the average figures are not falling and a large part of that is down to mortgage overpayment.

Hew repayment is around £24bn+ per year at the moment. Over 2% of income.

Generali

I don't know a huge amount about the survey but I deal with Markit most days. They sell asset price data to financial firms.

2,000 people should give an accuracy to within about 3% so it is fair it say that 4-10% probably see finances improving and 34-40% probably see finances improving.