£1,300,000,000,000 in debt
By Dan Roberts and Iain Dey, Sunday Telegraph
Last Updated: 12:56am BST 17/06/2007
The day of reckoning has arrived for a debt-soaked nation living for too long on easy credit. And it's going to hurt
Shocking picture is here: http://www.telegraph.co.uk/news/grap...nrdebt117b.jpg
Last week in Cardiff, a mild-mannered man called Mervyn stood up, pushed back his glasses and stated the obvious: "It is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels." (AtW's comment: where the f..k were you in the last few years then, the cat got your tongue I presume?)
Sensible, if unremarkable advice, one might think, from a governor of the Bank of England known for his conservatism. But Mr King's warning to the Welsh CBI marks the end of a decadent decade in British history when many of us have done exactly that: borrowing as if there were no tomorrow, living on the never-never, driven (or reassured) by the ever-rising price of the roof above our heads.
The day of reckoning has come for a debt-soaked society that has seen outstanding household loans double to £1.3 trillion in just seven years.
In a deliberate new policy of blunt-speaking, the governor eschewed the normally equivocal language of central bankers to warn that if we don't change our free-spending ways, he will - by pushing up interest rates until the growing threat of inflation is eliminated.
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"It wasn't what he said; it was who was saying it," says Ray Boulger, a mortgage broker. City economists expect the response to come by August, increasing interest rates from 5.5 to 5.75 per cent. But the real fear is that this will not be enough and that 6 per cent interest rates will be with us by the autumn.
This could make for a rocky Christmas, not just for homeowners but also shops and manufacturers reliant on easy credit to fuel consumer spending. Property experts fear the housing market may not be able to cope
"A quarter point rise is as much as the market can take. Anything more will precipitate a serious crash," says Robert Bryant-Pearson, of Allied Surveyors, the largest independent property valuer. "Everyone seems to forget what happened between 1990 and 1993: the repossessions, the negative equity. The problem now is that people's borrowing in relation to their income is extremely high."
So far, the level of repossessions is a far cry from the days of the early 1990s recession and property crash. Between 1990 and 1993, 247,000 homeowners lost their homes as house prices slumped and unemployment rose sharply.
But the Council of Mortgage Lenders estimates this measure of affordability, or arguably unaffordability, reached a 15-year record even before the latest mortgage rises kicked in, this spring.
For this reason, others think we have already reached the point where the credit crunch is biting. "I doubt the housing market can even take another quarter point," adds Boulger, one of the most respected mortgage commentators.
"Only in London, Scotland and Northern Ireland are house prices still climbing. Another rate rise would choke this off and push prices in much of the rest of the country into reverse."
To make matters worse, the biggest impact of higher mortgage rates is still to come for many homeowners. Analysts at Credit Suisse estimate a million borrowers who took advantage of cheap two-year fixed rate loans at the end of 2005 are about to experience the shock of their lives.
James Callaghan, a civil servant in Darlington is typical of those discovering the painful new reality: "If we stick with our current mortgage lender, our mortgage rate will jump from 4.94 per cent to 6.75 per cent." In extreme cases, the repayments on a £400,000 interest-only mortgage would increase from about £1,400 a month to about £2,000, up by 43 per cent.
But tightening of the interest-rate screws by the Bank of England is only the half the story. On the other side of the Atlantic, the cost of borrowing is shooting up even for George W Bush.
The world's most powerful government gets to borrow from the world's deepest financial pool: the colossal market in US government debt, known as Treasury bonds.
More here: http://www.telegraph.co.uk/news/main.../nrdebt117.xml
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The end is well and truly nigh...
[PHP]
By Dan Roberts and Iain Dey, Sunday Telegraph
Last Updated: 12:56am BST 17/06/2007
The day of reckoning has arrived for a debt-soaked nation living for too long on easy credit. And it's going to hurt
Shocking picture is here: http://www.telegraph.co.uk/news/grap...nrdebt117b.jpg
Last week in Cardiff, a mild-mannered man called Mervyn stood up, pushed back his glasses and stated the obvious: "It is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels." (AtW's comment: where the f..k were you in the last few years then, the cat got your tongue I presume?)
Sensible, if unremarkable advice, one might think, from a governor of the Bank of England known for his conservatism. But Mr King's warning to the Welsh CBI marks the end of a decadent decade in British history when many of us have done exactly that: borrowing as if there were no tomorrow, living on the never-never, driven (or reassured) by the ever-rising price of the roof above our heads.
The day of reckoning has come for a debt-soaked society that has seen outstanding household loans double to £1.3 trillion in just seven years.
In a deliberate new policy of blunt-speaking, the governor eschewed the normally equivocal language of central bankers to warn that if we don't change our free-spending ways, he will - by pushing up interest rates until the growing threat of inflation is eliminated.
advertisement
"It wasn't what he said; it was who was saying it," says Ray Boulger, a mortgage broker. City economists expect the response to come by August, increasing interest rates from 5.5 to 5.75 per cent. But the real fear is that this will not be enough and that 6 per cent interest rates will be with us by the autumn.
This could make for a rocky Christmas, not just for homeowners but also shops and manufacturers reliant on easy credit to fuel consumer spending. Property experts fear the housing market may not be able to cope
"A quarter point rise is as much as the market can take. Anything more will precipitate a serious crash," says Robert Bryant-Pearson, of Allied Surveyors, the largest independent property valuer. "Everyone seems to forget what happened between 1990 and 1993: the repossessions, the negative equity. The problem now is that people's borrowing in relation to their income is extremely high."
So far, the level of repossessions is a far cry from the days of the early 1990s recession and property crash. Between 1990 and 1993, 247,000 homeowners lost their homes as house prices slumped and unemployment rose sharply.
But the Council of Mortgage Lenders estimates this measure of affordability, or arguably unaffordability, reached a 15-year record even before the latest mortgage rises kicked in, this spring.
For this reason, others think we have already reached the point where the credit crunch is biting. "I doubt the housing market can even take another quarter point," adds Boulger, one of the most respected mortgage commentators.
"Only in London, Scotland and Northern Ireland are house prices still climbing. Another rate rise would choke this off and push prices in much of the rest of the country into reverse."
To make matters worse, the biggest impact of higher mortgage rates is still to come for many homeowners. Analysts at Credit Suisse estimate a million borrowers who took advantage of cheap two-year fixed rate loans at the end of 2005 are about to experience the shock of their lives.
James Callaghan, a civil servant in Darlington is typical of those discovering the painful new reality: "If we stick with our current mortgage lender, our mortgage rate will jump from 4.94 per cent to 6.75 per cent." In extreme cases, the repayments on a £400,000 interest-only mortgage would increase from about £1,400 a month to about £2,000, up by 43 per cent.
But tightening of the interest-rate screws by the Bank of England is only the half the story. On the other side of the Atlantic, the cost of borrowing is shooting up even for George W Bush.
The world's most powerful government gets to borrow from the world's deepest financial pool: the colossal market in US government debt, known as Treasury bonds.
More here: http://www.telegraph.co.uk/news/main.../nrdebt117.xml
---------
The end is well and truly nigh...
[PHP]
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