Discretionary spending is further threatened.
The recession may be officially over, but more than a quarter of home owners
risk losing their homes after admitting they are still living on a
“financial precipice”.
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Latest research suggested 26 per cent of borrowers aged between 35 and 44
would be unable to meet their mortgage repayments if they saw a £300 drop in
their monthly income.
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And one in eight adults in this age range has deliberately over-inflated their
income to secure a larger loan, according to the YouGov research,
commissioned credit reference agency Callcredit.
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Graham Lund, managing director of Callcredit, said: “These statistics are
extremely alarming. A significant proportion of these people, many with
families to support, are living on a financial precipice where just one
negative event, such as a reduction in paid overtime or an unexpected
expense, could have disastrous financial consequences.”
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The need for alternative media of exchange to fiat money increases every day. Gold will not do. The chart below shows the US Federal Debt per person. In the last ten years it has gone from $ 20,000 to $ 40,000. If we were to also include the present value of the government’s future unfunded liabilities like Social Security and Medicare, the debt per person would soar to more than $250,000. |
| The problem is not just the current debt levels of these nations, because the deficits in all the countries are rising. Tax revenues are collapsing at the same time, while the governments’ expenses for social charges are soaring. |
Governments like the US and the UK are committed to printing increasing amounts of worthless paper money in order to finance their growing deficits. The consequence of this rescue mission will be a hyperinflationary depression in many countries, due to many currencies becoming worthless. Read more at dailyreckoning.com |
Fears of a double-dip recession intensified this morning as the sharpest
monthly fall in retail sales in one and a half years was revealed.
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The downbeat spending figures come the morning after a shock rise in public
sector borrowing emerged, casting doubt over the recovery. The £4.3 billion
deficit for last month is the first time on record that the Treasury has not
recorded a January surplus.
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Treasury coffers were hit by a plunge in tax receipts prompting concern that
Britain’s finances could be worse than those of Greece.
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| Between December and January, total sales volumes decreased by
1.8 per cent, the largest decrease since June 2008, |
The retailing data is also likely to reinforce expectation that interest rates
will remain on hold for the most of this year, despite recent rises in
inflation.
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| Add into the mix the ongoing urge to
save or to pay down debt, plus the impending rise in income taxes, and
consumer spending seems likely to continue to spiral downwards in the months
aheadRead more at business.timesonline.co.uk |
| Millions of borrowers are facing “crippling” debts after banks put up interest
rates on credit cards to a 12 year high |
The average rate of interest has now climbed to 18.8 per cent, the highest
since 1998, with some card holders being forced to pay as much as 46 per
cent in interest.
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The figures emerged as a separate report by price comparison website Moneysupermarket.com
showed how two out of five borrowers are relying on their credit cards to
buy even the most basic of everyday items, such as food and petrol.
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| Having three or more credit cards is now standard practice for one in five
Britons, with 17 per cent of credit card holders using their card at least
once a day |
| Britain’s credit card operators and banks |
| increased the
profit margins on mortgages and lowered savings rates.
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Credit card providers are increasing rates amid concerns about borrowers
failing to repay their debts.
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| A record 134,142 people in England and Wales were declared insolvent last year
— an increase of nearly 26 per cent on 2008, according to figures released
today by The Insolvency Service.
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| More than half of these were bankruptcies, with the remainder made up of
individual voluntary arrangements (IVAs) and Debt Relief Orders, a new
insolvency process introduced last year. |
| However, the number of company liquidations fell in the last three months of
2009 — to 4,566, down 1.7 per cent on the previous quarter and down 1.1 per
cent year-on-year.
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Begbies cited the impact of HM Revenue & Customs’s “time to pay”
scheme, which has enabled struggling companies to defer more than £4 billion
of PAYE tax and national insurance liabilities, and kept many afloat when
they might otherwise have failed.
Read more at www.timesonline.co.uk |
When the debt treadmills spin too fast, people will have to jump off, ditch the dollar and create their own media of exchange. Communities did it very sucessfully in the 1930s with their own ’scrip’ currencies. | Rob Arnott, who always does terrific research, wrote in his recent report that “at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company–only Japan, Lebanon and Zimbabwe are higher. That’s only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. |
Add the unfunded portion of entitlement programs and we’re at 840% of GDP. |
| This debt is not serviceable. |
| The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt. |
| Japan’s recession is now 19 years old. It has the highest debt-to-GDP level (227%) of any industrialized country. |
It’s the first step towards real freedom. The British could be leading the world here.
Families are putting aside record amounts of savings as they take drastic
measures to pull themselves out of debt.
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The average household saved almost £300 a month in the three months to
September – the biggest amount in any quarter in British economic history,
according to the Office for National Statistics.
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| it is thought most of the savings will have
been used to clear debts: the Government’s official definition of saving
includes paying off debt.
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However, economists said that the consequence of families saving more is that
it would constrain high street sales and could help prolong the economic
downturn.
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| In the US,
although the economy is now out of recession, this has been achieved partly
by encouraging families to save less, and the savings ratio actually fell in
the third quarter.
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| The disclosure is the latest evidence of how families are having to put aside
unprecedented amounts of cash in order to rebuild their balance sheets |
No more massive government bailouts available this time round. You see, this second wave will come crashing even harder than the first. It’s made up of a type of mortgage called “Option ARMs.” These give borrowers the option of how much they want to pay during the first five or 10 years of repayment: |
1) The full amortized rate, including interest and principal.
2) Interest only, or…
3) A token payment, well below the amount needed to cover the interest on the loan. |
This third option causes the mortgage balance to INCREASE instead of decrease. And usually, the borrower can continue to make minimum payments until the mortgage balance increases to 125% of the original amount. That’s when the trouble begins…especially if the interest rate increases at the same time. |
This is the exact situation in which many homeowners now find themselves. |
| about 80% of option ARMs are negatively amortizing. |
Instead of resetting as expected after the first five years, many option ARMs are so negatively amortized that they are hitting their automatic reset cap. |
More people than ever before were declared insolvent in England and Wales during the third quarter of the year. Figures released by the Insolvency Service yesterday reveal that there were 35,242 personal insolvencies over the three months to the end of September, up by 28 per cent on the same period of 2008, and by 6 per cent on the previous quarter. |
| Just over half of the insolvencies were fully fledged bankruptcies, while around 17,000 people entered into an individual voluntary arrangement (IVA) or a debt relief order (DRO). |
There is also some concern that the Insolvency Service’s figures do not include debt management plans, where people agree with their creditors to pay a set amount each month, often of a token sum. These schemes do not count as insolvencies and no central register is kept, though many thousands of struggling borrowers are thought to have been advised to accept such arrangements with lenders. Read more at www.independent.co.uk |
Proposals would force borrowers to pay back more of their debt earlier and stop issuers raising credit limit without consent |
Prime minister Gordon Brown said credit card companies would be forced to give consumers a fairer deal. |
Credit card firms could be banned from increasing borrowers’ credit limits and the interest rates they pay in moves which the government today said would put consumers “back in the driving seat”. |
Under the proposals, which had been heavily trailed in the run-up to today’s consultation paper, card providers could also be forced to increase the minimum monthly repayment they demand. As revealed in Sunday’s Observer, the government is considering raising this to at least 5% of the outstanding balance. |
At the moment, minimum monthly payments are typically set at a level covering that month’s interest charges. So, for example, someone with an outstanding credit card balance of £1,856 with an interest rate of 17.6% would pay £4,620 in total interest charges over 38 years and 10 months at a typical minimum repayment of 2% of the outstanding balance. Read more at www.guardian.co.uk |
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Teetering on the edge - A quarter of home owners live on ‘financial precipice’
