What's going on here? Personal debt

BobQ

We should never underestimate the stupidity of the public. They love to borrow money to live beyond their means. Even though inflation has largely reduced personal debts and they have enjoyed record low interest rates they do not learn and borrow more. We continue to have a culture of " I want so I must have". People need to learn to save up for what they want.

Perhaps a rise in interest rates will curb their inclination to borrow.

HappyMJ

It's probably my fault. I've borrowed money at low rates and put it in bank accounts earning more. I've got at least £25,000 of borrowings at 3.6% or less. Half of it at 0%. I also have £25,000 of cash in regular savings accounts earning up to 6% interest.

CLAPTON

seems that vast majority of the debt is mortgages
as most / many mortgages cost less than the equivalent rent, it seems all very boring sensible

catwoman73

It could be people like me.

Over the past few years I have amassed about £30k in savings. I could have overpaid my mortgage, but it is on a lifetime tracker with an interest rate of less than 1% so that would be a stupid thing to do.

However, I have just spent about £45k on a house extension so now have almost no savings, a £10k personal loan and about £4k on 0% finance from Ikea for the kitchen. I also have a small car on 0% PCP, so am actually now about £25k in debt but thankfully have a very secure job and plenty of disposable income to cover the payments.

Over the next few years my priorities will be paying off the loan/finance and replacing the savings, especially as I plan to pay off and keep the car when the PCP deal ends in 2 years time.

The mortgage is probably about 40% LTV but I won't think about overpaying it until there comes a time when I can't get more in interest from savings (currently get 3-5% in several high interest current accounts).

somethingcorporate

With credit as cheap as it has ever been surely this is just the laws of supply and demand at work?

BobQ

somethingcorporate wrote: »

With credit as cheap as it has ever been surely this is just the laws of supply and demand at work?

Assuming you can pay it off in a few months true but taking on long term debt when rates are low could be a dangerous strategy (particularly when experts are talking of rates rising)

Thrugelmir

catwoman73 wrote: »

I also have a small car on 0% PCP, .

At the end of the day you will have paid full price with no discount.

Thrugelmir

BobQ wrote: »

Even though inflation has largely reduced personal debts and they have enjoyed record low interest rates they do not learn and borrow more.

Deflation won't make leveraging up with debt so attractive either. As it will be like a ball and chain around the ankle for a very long time. High inflation is a totally different ball game.

emmsie123

catwoman73 wrote: »

It could be people like me.

Over the past few years I have amassed about £30k in savings. I could have overpaid my mortgage, but it is on a lifetime tracker with an interest rate of less than 1% so that would be a stupid thing to do.

However, I have just spent about £45k on a house extension so now have almost no savings, a £10k personal loan and about £4k on 0% finance from Ikea for the kitchen. I also have a small car on 0% PCP, so am actually now about £25k in debt but thankfully have a very secure job and plenty of disposable income to cover the payments.

Over the next few years my priorities will be paying off the loan/finance and replacing the savings, especially as I plan to pay off and keep the car when the PCP deal ends in 2 years time.

The mortgage is probably about 40% LTV but I won't think about overpaying it until there comes a time when I can't get more in interest from savings (currently get 3-5% in several high interest current accounts).

No job is 100% secure, plus you never know if an illness or accident or any number of things will hit you.

CLAPTON

emmsie123 wrote: »

No job is 100% secure, plus you never know if an illness or accident or any number of things will hit you.

indeed an excellent reason why no-one should ever get a mortgage