- What have the above got in common?
Personal debt has been driven up by our previous government allowing banks to basically over lend, just like the previous government increased the countries own debt level. It all has to be repaid at some point and now we find the banks are unable to lend against property unless people can provide a deposit, in some cases being up to 35% of the desired property value. Interbank lending reductions are also showing signs of returning. This means money becomes even shorter in supply generally throughout the entire economy.
If we look at consumer personal debt levels, these have been created via irresponsible lending and irresponsible spending, but not in all cases.
Some people have also consolidated their personal unsecured debts such as credit cards and loans, store cards and catalogues into either a new secured loan against their home or into the existing mortgage by remortgaging the money from available equity in their home.
This is very risky when you think that in the very near future, interest rates will have to start going up again and that will mean that people again will feel the squeeze in their monthly budget as their mortgage or home repayment costs go up. Some will be able to manage the increase and some will not, these are the people that really should be looking in their most trusted crystal ball at the moment.
When lending by banks against property reduces it can also mean that house prices in turn may fall, this is because people have to be more realistic about the value of their house for sale purposes if they really wish to move quickly, banks will only lend money against a property for what it is worth, not for what a vendor feels they have spent on it which actually becomes perceived added value. The perception of increased value is not always there in the eyes of the banks at the point of lending!
International investment from outside the UK from people moving here or buying second homes here, coupled with the fact that demand in the UK for new affordable housing is outstripping supply and has done for the past couple of decades, means that this supply and demand issue for new affordable housing could be the only saving grace to our UK housing market, if the international money which usually goes directly into London stops due to global issues and the banks don’t inter lend, then the only people buying houses will be first time buyers with very large deposits, therefore a reduction in most house prices would follow.
If you have unsecured personal debts and a mortgage to pay each month you should make sure that the credit repayments are not eating up the majority of your income, if they are it is time to seek some personal debt advice. If you think things could get out of control for you financially if you suffered a change in circumstance, then you should be planning ahead just in case.
When you repay credit cards and loans, sometimes you are servicing the debt by only paying interest that is accruing, this is as good as renting your debt off of your creditor, you must get into a debt reduction plan as soon as possible if this is the case.
- Taking the first step to sorting a financial problem is usually the hardest, as with most unfamiliar things we do in life.
If you need professional advice regarding your outstanding personal finances then call our personal debt helpline today in confidence using 0800 018 6868, lines are open 24 hours and your call is free.
