Finances and debt worsen

pqrdef

Graham_Devon wrote: »

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

But Dave told the Tory conference that people were paying off their credit cards (after being talked out of saying that they ought to be). Did he get his facts wrong?

Really2

ruggedtoast wrote: »

There is only so long we can keep going on with wage inflation at 0% and actual inflation running at over 5% before people start going underwater.

How do you get wage inflation at 0%?

Generali

StevieJ wrote: »

Would the accuracy be affected if they were paid for completing the survey?

I doubt it TBH. Markit make most of their money valuing assets in a way that all parties should be able to trust. If they could be shown to have purchasable bias then their business would be shot to pieces.

For example, they price some derivatives for a client of mine. Now there will be a broker (probably an investment bank) who also does business with Markit that may have an interest in the asset being priced in a particular way in order to make more money. However, the client just wants to see a 'fair' valuation.

There isn't (or doesn't seem to be) the same conflict of interest that the ratings agencies have.

JonnyBravo

Graham_Devon wrote: »

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

As I recall there were several items which showed debt was decreasing eg overall mortgage debt being paid off etc.
So its not as if people were making it up.... is it?

So what appears to be happening is you are decrying past sources of evidence as "tosh" yet appear to be incredulous that others might question your source.

Of course what could really have happened is that both were right but time has changed things, or that statistical noise has allowed both to be right etc etc

But no..... its the one eyed bias of others that really amuses you.
Look in the mirror Graham, look in the mirror.

Batchy

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.

More hoseholds appearing, unable to buy or get credit, dont read too much into it.

People are paying off debt as there isnt much choice... but the getting more credit at the moment part is difficult indeed.

deary65

Generali wrote: »

I doubt it TBH. Markit make most of their money valuing assets in a way that all parties should be able to trust. If they could be shown to have purchasable bias then their business would be shot to pieces.

For example, they price some derivatives for a client of mine. Now there will be a broker (probably an investment bank) who also does business with Markit that may have an interest in the asset being priced in a particular way in order to make more money. However, the client just wants to see a 'fair' valuation.

There isn't (or doesn't seem to be) the same conflict of interest that the ratings agencies have.

This is an interesting article on market psychology, if you have the time to read it. By Daniel Kahneman is emeritus professor of psychology and of public affairs at Princeton University and a winner of the 2002 Nobel Prize in Economics. This article is adapted from his book “Thinking, Fast and Slow,” out this month from Farrar, Straus & Giroux.

http://www.nytimes.com/2011/10/23/magazine/dont-blink-the-hazards-of-confidence.html?_r=3&ref=magazine&pagewanted=all

Kennyboy66

Really2 wrote: »

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

This was my belief as well, and it heartened me each quarter to see the HEW figure come out as £7 billion or whatever (for some reason the Q2 2011 figures which should have been released at beginning of October have not been published yet) - and I used to wrongly think this was a good proxy for mortgage overpayments.

However, this paper

http://www.bankofengland.co.uk/publications/quarterlybulletin/qb110205.pdf

suggests that it is not mortgage overpayments at all, but all to do with lower transactions, probably combined with 1st time buyers having to stump up massive deposits (by historical standards).

"The net effect of a chain of housing transactions is typically a large equity withdrawal. The fall in the number of housing transactions is therefore likely to have been a key driver of the fall in equity withdrawal since the financial crisis. There is little sign that, at the aggregate level, households are making an active effort to pay down debt more quickly than in the past."

The corollary of this would probably be that the MEW numbers of old, overstated the amount people were spunking on holidays to Benidorm, Sony massive TVs or German cars (insert your favourite cliches here folks).

Really2

Kennyboy66 wrote: »

suggests that it is not mortgage overpayments at all, but all to do with lower transactions, probably combined with 1st time buyers having to stump up massive deposits (by historical standards).

"The net effect of a chain of housing transactions is typically a large equity withdrawal. The fall in the number of housing transactions is therefore likely to have been a key driver of the fall in equity withdrawal since the financial crisis. There is little sign that, at the aggregate level, households are making an active effort to pay down debt more quickly than in the past."

So overall, reading that as people who overpaid still over pay.
But as less are moving there is less HEW so the overpayments are now showing (as a negative figure) where as before hew was covering the figure.

But could the bold bit mean that those that repaid at £1000 pre bust still repay at £1000 now rates are lower.
So they are repaying debt faster, but with no active effort of increasing payment, thus not actively trying to reduce debt quicker.
A more passive debt reduction by circumstance.

Kennyboy66

Really2 wrote: »

So overall, reading that as people who overpaid still over pay.
But as less are moving there is less HEW so the overpayments are now showing (as a negative figure) where as before hew was covering the figure.

But could the bold bit mean that those that repaid at £1000 pre bust still repay at £1000 now rates are lower.
So they are repaying debt faster, but with no active effort of increasing payment, thus not actively trying to reduce debt quicker.
A more passive debt reduction by circumstance.

There is a line in the report that states that the data is available for mortgage overpayments (lump sum or monthly) but I haven't seen it.

What does seem certain is that collectively we are getting worse off because inflation is ahead of earnings.
Add to that taxes will rise, not least because personal allowance won't keep pace with inflation.

Really2

Kennyboy66 wrote: »

There is a line in the report that states that the data is available for mortgage overpayments (lump sum or monthly) but I haven't seen it.

The bit I can see is a graph on page 132 seeming to indicate that mortgage repayments are around the same as 2007 and lump repayments are about the same also.
Can't see the figures myself but looking at that my previous guess would not be that far off. Most people have left repayments the same when rates have fallen.
That in itself is good to see.
We will all be getting worse off, but in reality that has been coming for years.