wasp
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Okay, in a vain attempt to rectify my drunken thread last night, heres a new one for an interesting read... (I'll keep my input to a minimum so I can't mess it up!). Now, where's the ibuprofen 
:cheesy:
£1,300,000,000,000 in debt
By Dan Roberts and Iain Dey, Sunday Telegraph
The day of reckoning has arrived for a debt-soaked nation living for too long on easy credit. And it's going to hurt
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."
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."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.
But the past few days have seen the water draining out with alarming speed. Triggered in part by reckless bank lending to American trailer parks - known euphemistically as the "sub-prime" market - plummeting prices in the bond market are bringing an end to a golden age during which the global economy has been running on a super-charged fuel of cheap money.
This cheap money has powered the inexorable rise of private equity takeovers, a phenomenon that is now causing political uproar and has seen many household company names sold to overseas buyers. Cheap money has also been the hidden force driving investment by British companies, allowing them to invest and create new jobs, as well as contributing to a bonus boom in the City.
Cheap money has kept the stockmarket powering to new highs. And cheap money, supplied by the bond markets, has played a part in the consumer debt boom, allowing personal debt to balloon while keeping Britain's shopkeepers busy.
Most of all, it has been the real force behind the steady flow of cheap mortgages that have been stoking the fires of the British housing market. Roughly 70 per cent of mortgages sold in Britain over the past few years have been fixed-rate deals. In fact, the switch to fixed-rate deals has been one of the single biggest shifts in the UK's financial system of the past decade.
"The movements in the bond markets will affect the man in the street," says David Miles, the chief UK economist at Morgan Stanley, who has previously written reports for the Treasury on the British housing market. "The pricing of those mortgages moves closely in line with the bond markets.
And those rates have become more expensive in the past few weeks." After turmoil in the US Treasury market, the prices that Britain's banks pay to fix a mortgage for two to three years have soared by about 20 per cent since the start of the year.
A handful of smaller mortgage lenders have already stopped offering fixed-rate mortgage deals altogether since the start of June, according to Moneyfacts, the internet money site. Major lenders such as Abbey, HBOS and Royal Bank of Scotland have hiked fixed-rate mortgage deals far enough to make them unappealing to consumers.
But the end of the era of cheap money will be felt far beyond the housing market. George Bush is not the only one soon to find borrowing more expensive.
Gordon Brown has also been living on the never-never, allowing UK public borrowing to climb and hiding even more government debt in such schemes as the private finance initiative, which store up liabilities for future generations. Unfunded public pensions and student loans (estimated to leave those graduating in 2009 with an average £30,000 debt) are other growing forms of inter-generational borrowing.
Yet for many of those graduates trying to make ends meet, let alone climb onto the housing ladder, debt is not just getting more expensive; it is getting harder to come by. The impending credit crunch threatens to arrive just as those trying to keep the plates spinning need access to flexible borrowing most of all.
The Citizens Advice Bureau says the tightening of lending criteria just when levels of debt have never been higher ever means we are entering unchartered waters. "We are seeing record numbers of people with debt problems and this is in supposedly good economic times," says Peter Tutton, of the CAB. "What no one really knows is what happens when the credit carousel stops."
Of course the Bank of England doesn't want to bring things to a crashing halt. But Government bungling has muddied the waters, making it harder to assess the true state of the housing market by encouraging an artificial spike in activity before the (now postponed) introduction of Home Information Packs.
The move to fixed-rate mortgages has also restricted the Bank of England's ability to influence the economy. When everyone's mortgage was linked directly to the Bank of England's base rate, the consumer economy could be kept on a tight leash.
"In the good old days, the bank would raise rates and you'd get a letter from your mortgage provider about 30 seconds later telling you your mortgage had gone up," says Paul Donovan, a global economist at the financial services firm UBS. "Now what you get is a stepped process where eventually your mortgage rate will reflect what's going on with the base rates, but it takes time."
This is why Mervyn King's caution may yet be overshadowed by the broader credit crunch rippling through global financial markets. "Everyone focuses on interest rates when they think about the housing market," says Alan Castle, a senior UK economist at Lehman Brothers.
"A lot of the strength in the housing markets and consumer spending recently has been driven by people having easier access to credit. It's about the ability of people who would have been considered risky borrowers to get a mortgage."
What worries City economists now is how reliant the economy has become on easy credit. "There has been a cycle where the availability of credit has kept consumer spending high," says Mr Donovan at UBS. "That has supported the economy, which has supported employment, which has kept the consumer confident, which has encouraged him to borrow more money. And so we go round again."
Jumping off this money merry-go-round is a worry for us all. Georgina Taylor, a European strategist at Goldman Sachs, the investment bank, concludes: "The typical household financial position has weakened dramatically in the past year or so. That has quite a feed through to consumer spending, which means the UK economy is vulnerable - the great conditions we've had in recent years are about to change."
glad I moved personally!
:cheesy: £1,300,000,000,000 in debt
By Dan Roberts and Iain Dey, Sunday Telegraph
The day of reckoning has arrived for a debt-soaked nation living for too long on easy credit. And it's going to hurt
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."
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."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.
But the past few days have seen the water draining out with alarming speed. Triggered in part by reckless bank lending to American trailer parks - known euphemistically as the "sub-prime" market - plummeting prices in the bond market are bringing an end to a golden age during which the global economy has been running on a super-charged fuel of cheap money.
This cheap money has powered the inexorable rise of private equity takeovers, a phenomenon that is now causing political uproar and has seen many household company names sold to overseas buyers. Cheap money has also been the hidden force driving investment by British companies, allowing them to invest and create new jobs, as well as contributing to a bonus boom in the City.
Cheap money has kept the stockmarket powering to new highs. And cheap money, supplied by the bond markets, has played a part in the consumer debt boom, allowing personal debt to balloon while keeping Britain's shopkeepers busy.
Most of all, it has been the real force behind the steady flow of cheap mortgages that have been stoking the fires of the British housing market. Roughly 70 per cent of mortgages sold in Britain over the past few years have been fixed-rate deals. In fact, the switch to fixed-rate deals has been one of the single biggest shifts in the UK's financial system of the past decade.
"The movements in the bond markets will affect the man in the street," says David Miles, the chief UK economist at Morgan Stanley, who has previously written reports for the Treasury on the British housing market. "The pricing of those mortgages moves closely in line with the bond markets.
And those rates have become more expensive in the past few weeks." After turmoil in the US Treasury market, the prices that Britain's banks pay to fix a mortgage for two to three years have soared by about 20 per cent since the start of the year.
A handful of smaller mortgage lenders have already stopped offering fixed-rate mortgage deals altogether since the start of June, according to Moneyfacts, the internet money site. Major lenders such as Abbey, HBOS and Royal Bank of Scotland have hiked fixed-rate mortgage deals far enough to make them unappealing to consumers.
But the end of the era of cheap money will be felt far beyond the housing market. George Bush is not the only one soon to find borrowing more expensive.
Gordon Brown has also been living on the never-never, allowing UK public borrowing to climb and hiding even more government debt in such schemes as the private finance initiative, which store up liabilities for future generations. Unfunded public pensions and student loans (estimated to leave those graduating in 2009 with an average £30,000 debt) are other growing forms of inter-generational borrowing.
Yet for many of those graduates trying to make ends meet, let alone climb onto the housing ladder, debt is not just getting more expensive; it is getting harder to come by. The impending credit crunch threatens to arrive just as those trying to keep the plates spinning need access to flexible borrowing most of all.
The Citizens Advice Bureau says the tightening of lending criteria just when levels of debt have never been higher ever means we are entering unchartered waters. "We are seeing record numbers of people with debt problems and this is in supposedly good economic times," says Peter Tutton, of the CAB. "What no one really knows is what happens when the credit carousel stops."
Of course the Bank of England doesn't want to bring things to a crashing halt. But Government bungling has muddied the waters, making it harder to assess the true state of the housing market by encouraging an artificial spike in activity before the (now postponed) introduction of Home Information Packs.
The move to fixed-rate mortgages has also restricted the Bank of England's ability to influence the economy. When everyone's mortgage was linked directly to the Bank of England's base rate, the consumer economy could be kept on a tight leash.
"In the good old days, the bank would raise rates and you'd get a letter from your mortgage provider about 30 seconds later telling you your mortgage had gone up," says Paul Donovan, a global economist at the financial services firm UBS. "Now what you get is a stepped process where eventually your mortgage rate will reflect what's going on with the base rates, but it takes time."
This is why Mervyn King's caution may yet be overshadowed by the broader credit crunch rippling through global financial markets. "Everyone focuses on interest rates when they think about the housing market," says Alan Castle, a senior UK economist at Lehman Brothers.
"A lot of the strength in the housing markets and consumer spending recently has been driven by people having easier access to credit. It's about the ability of people who would have been considered risky borrowers to get a mortgage."
What worries City economists now is how reliant the economy has become on easy credit. "There has been a cycle where the availability of credit has kept consumer spending high," says Mr Donovan at UBS. "That has supported the economy, which has supported employment, which has kept the consumer confident, which has encouraged him to borrow more money. And so we go round again."
Jumping off this money merry-go-round is a worry for us all. Georgina Taylor, a European strategist at Goldman Sachs, the investment bank, concludes: "The typical household financial position has weakened dramatically in the past year or so. That has quite a feed through to consumer spending, which means the UK economy is vulnerable - the great conditions we've had in recent years are about to change."
glad I moved personally!
