A quarter of population “not in control” of their finances
Posted by robin in Financial Articles Tuesday December 16, 2008 1:25 pm
Rarely can a new year have been anticipated with such dread.
By all accounts, 2009 is going to be miserable for many.
Research findings from insurer Axa Group give an indication of how bad. It finds:
- 11.6m (a quarter of the UK adult population) are ”not in control of their finances” with 1.3m saying their personal finances ”are entirely out of control”
- 6.1m have no savings left with 1.7m saying their savings have evaporated in the credit crunch
- 3.8m can’t keep up with credit card bills
- 1.02m have borrowed too much and can’t keep up mortgage payments.
Other research by Abbey finds that 4.6m Brits are now holding on to cash in the house now faith in banks is shot.
More than £5bn has been tucked into teapots, stuffed under mattresses or stashed in newly acquired safes. Somewhat self-servingly it points out the danger of this strategy…burglary rates tend to rise in the bad times.
So it boils down to a straight calculation. The relative probabilities of being mugged either by your bank or by your neighbourhood burglar.
In yet more research, National Savings & Investments says more than half of the population do not save regularly and more than a fifth save nothing at all.
Now the tide’s gone out, that’s a lot of people swimming naked.
Negative equity…with a twist
Posted by robin in Financial Articles Market Commentary Monday November 17, 2008 3:15 pm
The astonishing tale of Iceland continues in an article by Robert Jackson from this week-end’s FT.
There is a particularly lethal twist to the Icelandic housing market it seems.
Icelandic mortgages are inflation-linked..!
Not the interest payments…the principle.
Today inflation is running at 20%, so mortgage debt will increase by as much as a fifth this year alone. Couple that with falling house prices and a trend in recent years toward 100% mortgages for first time buyers and…well, it’s not pretty even by UK standards of not pretty.
So, presumably, if a first time buyer bought a year ago with a 100% mortgage for, say 100,000 IKr, a year later he’s looking at 120,000 IKr mortgage on a house that might be worth 90,000 IKr or less.
30,000 IKr negative equity after a tumultous 12 months with likely worse to come.
Then there’s the cost of servicing the mortgage… Interest rates were raised in late October to 18% to tackle inflation.
Here too banking deregulation appears to have been a disaster. Icelandic banks were deregulated just seven years ago and have amassed $75bn in foreign debt. As we have seen, when the tide went out the big three - Kaupthing, Landsbanki and Glitnir - were found to have been swimming naked.
The country’s 300,000 souls now have an equivalent $250,000 foreign debt per head as a result.
Iceland’s wealth, as measured in GDP per capita, was amongst the world’s highest. It amounted to over $40,000 per head in 2005. Impressive of itself but puny against the debt mountain it now faces.
« Previous Entries
Latest Comments