800,000 "zombie households" only survive due to low rates

Graham_Devon

Don't shoot the messenger.

The financial crisis has cost British families around £30,000 per household and risks creating a swathe of ‘zombie’ households, warn experts.

Household wealth in the UK is now £787billion lower than it was at the end of 2007 before the banking crash and recession struck. And it won’t return to pre-crash levels until 2019.

But by far the biggest victims are middle class families and pensioners who have seen the value of their homes and savings plummet.

Many have also been hit by higher taxes as they bear the brunt of government efforts to repair the country’s crippled finances following the implosion of the banking system.

The £787billion assault on household wealth is close to the £1,000billion of taxpayers’ money that was used to prop up the banks at the worst point of the financial crisis.

The report – by the National Institute of Economic and Social Research – warns that the punishing squeeze on finances could lead to a sharp rise in the number of zombie households.

The term is used for those who are struggling to meet their mortgage repayments but stay in their homes only thanks to low interest rates and leeway from their lenders.

The Financial Services Authority, the City watchdog, reckons that more than 800,000 of all mortgages are subject to ‘forbearance’, which means the owner has either missed a payment or made one late.

It is feared many will lose their homes if interest rates rise or banks decide to clean up their balance sheets.

http://www.thisismoney.co.uk/money/mortgageshome/article-2139370/NIESR-warns-zombie-families-kept-afloat-cheap-mortgages.html

800,000 mortgages subject to forebearance seems quite a lot!!

MonkeyMad

The number of apostles is also very similar to the number of months in a year, so are they related (not that £787bn is particularly close to £1000bn)? No, so why try to link the amount of wealth 'lost' to savers to that used to help the bank, as it is a pointless comparison. Answer, because it sounds good.

Unless you were somehow relying on income from investments and savings to pay your day to day living expenses how does a reduction in wealth threaten your ability to pay the mortgage? Where do I sign up to write this claptrap?

CLAPTON

it seems that my wealth has taken a turn for the worst and I hadn't noticed
but hen it didn't notice it when my wealth took a turn for the better before the meltdown

the garden is just as green then as it is now

the article needs to make a clearer distinction between income and wealth
declining income can be painful
declining house prices doesn't have the same effect

just like the stock market; when it goes down a bit there are headlines 'billions wiped off the value of the stock market'; when it goes up there is no such headlines.

michaels

So when house prices increased it wasn't 'real' wealth as obviously a house is for living in not an asset and yet when they fall households have suffered a massive reduction in wealth...how does that work?

Rinoa

The Financial Services Authority, the City watchdog, reckons that more than 800,000 of all mortgages are subject to ‘forbearance’, which means the owner has either missed a payment or made one late.

So, we can assume over 10,000,000 other borrowers have never missed a single payment.

Graham_Devon

Rinoa wrote: »

So, we can assume over 10,000,000 other borrowers have never missed a single payment.

Yes, you certainly can.

Does that make the 800,000 or 8% irrelevant?

CLAPTON

Graham_Devon wrote: »

Yes, you certainly can.

Does that make the 800,000 or 8% irrelevant?

well, it means that there is insufficient information to make an informed judgement

a. what are comparable figures for other similar (or even normal ) periods

b. what are the figures for repossessions compared to other periods

Graham_Devon

I don't believe we have any real forebearance figures - it's a relatively new thing on such a scale.

The figures for repo's are low, compared to the last recession.

michaels

So are this 800k currently in arrears or is it that at some point they have been in arrears?

sabretoothtigger

Price does not determine value and utility

Houses are a practical asset, secure the costs and worry about any profits later. Hopefully its possible to always cheaper to buy then to rent in the long term

Rinoa

Graham_Devon wrote: »

Yes, you certainly can.

Does that make the 800,000 or 8% irrelevant?

Pretty much so. People missing a payment on their mortgage is not exactly new.