UK household debt versus assets

HAMISH_MCTAVISH

Graham_Devon wrote: »

Even he appears to have left after figuring out he doesn;t really know what he's trying to say!

I've already told you twice...;)

Graham_Devon

HAMISH_MCTAVISH wrote: »

I've already told you twice...;)

Now, I've asked you what your point is twice.

You've just told me the figures again and said it's not a crushing debt burden.

As others have pointed out, the assets you talk about are illiquid. The debt needs servicing. You are looking at apples, oranges and coming up with pineapples.

If say 30% of the population holding these asets tried to sell them off, asset prices and therefore your version of wealth would fall, considerably. Debt would remain the same. It would probably go up if these houses were succesfully sold, due to people taking on more debt.

wotsthat

Graham_Devon wrote: »

Now, I've asked you what your point is twice.

You've just told me the figures again and said it's not a crushing debt burden.

As others have pointed out, the assets you talk about are illiquid. The debt needs servicing. You are looking at apples, oranges and coming up with pineapples.

If say 30% of the population holding these asets tried to sell them off, asset prices and therefore your version of wealth would fall, considerably. Debt would remain the same.

The point is pretty simple. i.e. measured against assets debt levels are fairly low. In addition although we all like a moan on average a resident in the UK enjoys wealth that would be a simple fantasy for most of the worlds population.

Debt needs to be serviced and it needs to be serviced out of income. I'd say that debt levels measured against income are less healthy. However should income not be able to sustain debt servicing then downsizing is an option for those with the equity.

If say 30% of the population decided to sell assets this would, as you say, have a depressing effect on the price. Are you expecting 30% of the population to suddenly need to sell their assets?

Graham_Devon

wotsthat wrote: »

The point is pretty simple.

It's far too simple. That's the issue. That's why you are answering on hbehalf of Hamish!

the_flying_pig

wotsthat wrote: »

...Debt needs to be serviced and it needs to be serviced out of income...

Yes, that's it, the point, the only point.

UK household debts are such that consumption by UK households will be low for a long time. I have not seen this point disputed by anyone with any shred of credibility.

The value of households’ assets is much, much, much less relevant than savings or income levels since that value can only be got at through someone somewhere taking on more debt [i.e. homeowners MEWing or selling to non-homeowners who get mortgaged up].

So, yes, no-one’s arguing that we’re insolvent, that the UK economy is going to crack like an egg somehow. We’re just going to have low consumption and high debt repayments.

Thrugelmir

wotsthat wrote: »

However should income not be able to sustain debt servicing then downsizing is an option for those with the equity.

Releasing equity on that scale would require someone else to take on debt. Available credit is contracting so the equity would remain locked in. Unless you're prepared to forego some of your "gain" and accept less.

HAMISH_MCTAVISH

Graham_Devon wrote: »

If say 30% of the population holding these asets tried to sell them off, asset prices and therefore your version of wealth would fall, considerably. Debt would remain the same. It would probably go up if these houses were succesfully sold, due to people taking on more debt.

One more time, for the really thick people....

UK personal savings in financial assets alone are worth 450% of income.

Hint: Those are not houses Graham.;)

Last time I checked, stocks, bonds, etc were really quite liquid.

Now of course your earlier point is (miraculously) correct. If large numbers of people tried to sell the same asset at the same time, then prices of that asset would fall. But that's been the case for every asset in history.

HAMISH_MCTAVISH

the_flying_pig wrote: »

So, yes, no-one’s arguing that we’re insolvent,

Oh I think you'll find that's exactly what a number of our less than rational posters try to argue on a daily basis.:)

IveSeenTheLight

Graham_Devon wrote: »

So if my house is worth 300k, and I owe 100k on an interest only, or even repayment mortgage.

Are you saying I can just sell the house, and then I will have money, but no where to live?

This seems, well, rather stupid.

It's funny, the wife and I were talking about this after watching the welfare programme last week.
We saw a family on benefits renting in Islington and agreed that if we could not afford to live there, we'd move to a cheaper area.

In your example above, the owner has the option to sell, repay the debt of £100k and still have £200k to purchase a cheaper property else use the funds elsewhere and rent.

A far better scenario than just renting and not having the equity.

In essence your discussing downsizing.
I even know of people who have sold and rented their same property to benefit from the equity in their retirement.

Doesn't seem that stupid to be honest.

Graham_Devon

HAMISH_MCTAVISH wrote: »

One more time, for the really thick people....

UK personal savings in financial assets alone are worth 450% of income.

How much of that is pensions?

The average adult has £860 in savings.

For the thick people, can you explain how you draw down on pensions before retirement please..or indeed, how you draw down on them to pay off your debts.

As a thick person, I would be very interested.