Quantitative easing and low interest rates have not worked.
UK consumer borrowing is around £1.45 trillion and despite interest rates being at an historic low, it has not started to shrink. This is a serious matter, as interest rates are unlikely to stay this low for long and what should have been the ideal opportunity to pay down debt will have passed.
The Bank of England has warned that more than half the people with unsecured debts, such as credit cards or personal loans, are having a hard time coping. Of course the banks have been greedy with interest rates having risen from 17.8% in November 2007 to 18.7% now despite base rates dropping from 5.75% to 0.5%.
The Bank also found that nearly 50% of people still have fixed rate mortgages, which means that they are still paying off their housing debt at rates appropriate to 2007. That translates on an average mortgage to £680 a month compared with £530 a month for those on tracker mortgages.
Household income is reducing too as some people are taking drops in salary and others are losing jobs altogether. More than 50% of people are wor
ried about their debt getting out of hand. People who have high mortgages compared to the value of their houses are struggling the most. Some of course were given 120% mortgages shortly before the crash in house prices and the house has depreciated in value by a further 10-20%. They can’t sell; they can’t move, to take up a job or for whatever reason. They are stuck with negative equity in a house they can't afford.
It is unlikely that there will be a consumer boom to lift the economy if people are spending their money paying off previous debts, unable to remortgage and unable to get further credit.
It seems to me inevitable that the inflation rate, already at 4.5%, is bound to rise as a result of quantitative easing... or money printing as I prefer to call it. When that happens surely interest rates, and thus mortgage rates, credit card and loans interest rates will rise. Add in to the mix, the VAT rise and increases in fuel and food, together with a drop in the level of services and the future looks rather grim.
UK consumer borrowing is around £1.45 trillion and despite interest rates being at an historic low, it has not started to shrink. This is a serious matter, as interest rates are unlikely to stay this low for long and what should have been the ideal opportunity to pay down debt will have passed.
The Bank of England has warned that more than half the people with unsecured debts, such as credit cards or personal loans, are having a hard time coping. Of course the banks have been greedy with interest rates having risen from 17.8% in November 2007 to 18.7% now despite base rates dropping from 5.75% to 0.5%.
The Bank also found that nearly 50% of people still have fixed rate mortgages, which means that they are still paying off their housing debt at rates appropriate to 2007. That translates on an average mortgage to £680 a month compared with £530 a month for those on tracker mortgages.
Household income is reducing too as some people are taking drops in salary and others are losing jobs altogether. More than 50% of people are wor
ried about their debt getting out of hand. People who have high mortgages compared to the value of their houses are struggling the most. Some of course were given 120% mortgages shortly before the crash in house prices and the house has depreciated in value by a further 10-20%. They can’t sell; they can’t move, to take up a job or for whatever reason. They are stuck with negative equity in a house they can't afford.It is unlikely that there will be a consumer boom to lift the economy if people are spending their money paying off previous debts, unable to remortgage and unable to get further credit.
It seems to me inevitable that the inflation rate, already at 4.5%, is bound to rise as a result of quantitative easing... or money printing as I prefer to call it. When that happens surely interest rates, and thus mortgage rates, credit card and loans interest rates will rise. Add in to the mix, the VAT rise and increases in fuel and food, together with a drop in the level of services and the future looks rather grim.
You know Tris, the more I think about the finances of the UK, the angrier I become at the specific banks which caused the problem. They are who should be targeted in all this. The barstewards have got away with it otherwise and are laughing all the way down their glasses of Cristal.
ReplyDeleteRBS and HBOS are owned by the Inter-Alpha banking group who own 70% of World Banking. They are a Consortium of mainly Jewish bankers led by the Rothschilds. So in other words our Government is bailing out a bunch of Jewish bankers. Our Government then go to the international bond market and borrow money from the same bankers, they are baling out, to pay the debt off. Now if that's not a 'win, win' situation, I don't know what is!
ReplyDeleteMe too SR, I'm angry at the individual banks managed by greedy, stupid idiots either without the least understanding of what they were doing, or..... knowing full well what they were doing and that they would be bailed out when it all went belly up.
ReplyDeleteIf I could see that it would go belly up, they must have been able to.
But I'm also angry at the stupid government that allowed this to happen; that allowed the FSA to sit on their thumbs and let the world go by while they dined and treated themselves to massive salaries... and the bank of Engerland which did diddly squat.
And I’m angry at the present lot for getting the steps to recovery wrong. Oh dear, I just sound angry....
:(
Good heavens DL... It seems to be a lose lose situation for us... again, as usual...
ReplyDeleteWhy does Britain always play the mug?
The Mathematics of Chaos 3/7
ReplyDeleteIceland had the right idea by charging there leaders and bankers as they are crooks. We need democracy.
CH:
ReplyDeleteThe Icelanders usually get it right. The financial crisis was a blip. When you live where they live you can afford mistakes. That they survived this one is due to their friends, to their way of sorting things including the fact that they deal with the miscreants “pour encourager les autres”.
There is no such "encouragement" here. Blair goes free, Brown goes free; indeed they remain feted as "past prime ministers" and "great statesmen".
This is nonsense. They are blokes who did a job. Blair got a lot of things right; then he got a lot of things wrong. But he was a bloke doing a job. That’s it. Brown was simply an evil self interested madman from day one... and day one was in 1997. From then on his main aim was to get Blair out and be prime minister, and frankly, if that had not been his main aim, then we probably wouldn’t have had the boom that caused this bust. He had to prove that he could run a successful economy, and he was too frightening as a person for anyone to dare disagree with him. Even Blair.
They should both be either in prison, or shot for causing the death of so many people, Brits, Iraqis and Afghans.
Interesting film. I see it ends up saying that we could control “the bomb”. Was that not what they said at the beginning of the film about the industrial age? Why do men always think they can control things that they quite clearly cannot!
It's infuriating this situation. We sit and grin and let the people that do this get away with it. What the fuck is wrong with the country, even the world? Why are we just smiling as they shovel shit on our future - or get their secretaries to do it while they're on holiday. We need more than a Robin Hood Tax, we should have outright ban banker's bonuses.
ReplyDeleteI see the Irish have done just that. No bonus... no arguement.
ReplyDelete