Vocal Voices

Citizens Advice is saying that 51% of those it sees with debt issues have negative budgets. So, whose fault is it? The governments', the lenders' or the borrowers'? It's complicated... or simple.

For me it is all three.

I grew up in a time when if you didn't have you didn't get. Credit, apart from hire-purchase, was rare, and then if you couldn't pay the goods were taken away. Loans (of money) were almost unheard of unless you could prove you could pay them back. Mortgages!

Nowadays you can borrow up to your eyeballs based on your "credit score", and nobody thinks about the problems of having to pay it back. If your score is good - borrow - buy now, pay later. It's not just individuals, it's businesses and even countries.

Credit has become too easy to access, the adverts say it all the time, we need a reset.

Go back to the 60s and 70s, Save then buy. It ensures that you will not have a debt time bomb.

Simples!

Sounds simple doesn't it.

Now let's go back to 1930's Germany. Borrowing on a fixed rate was better than trying to save your money. If you borrowed today on fixed rate you could pay it off with a packet of fags next week.

OK single instance? Right? Or let us say 1971 in the UK, would you be better buying a house on a mortgage or putting your money in a bank?

In fact my parents bought a hose for £3,800. It was a 3 bedroom detached house, garden front and back and attached garage. They still own it. The inflation in the 1970"s destroyed the debt. Average for the 70"s was not much higher than we see today.

Then we have the much more recent event. All those very frugal Germans who squirreled their life's savings a way in times of low interest where the capital can retain it's value. Only to find that the oh so protected banks had bought US subsidiaries and funneled hard won German savings into them to gamble with it in less regulated environments and in the UK we were not immune to queues of people desperate to get their money out of failing institutions.

The world is never so cut and dried as you think.

If you want debt but don't own a home, regardless of equity, you wont be offered much debt. I can't get a single credit card that meets my monthly spend requirements for travel and accommodation. I have to pay it off part way through the month and even when I have been doing this for years, they still won't raise my rate. I just cancelled my Virgin credit card. They have refused to increase my limit for years now, but they accepted a payment I made in mistake for £500 over the balance of the card. Then fined me. I asked for an increase again and they said no, again. I payed them off and cancelled the card. Reason? You suck at business.

Oh you can get a high credit score, but you need either a property or to take long term finance and pay for at least half the term before paying it off. Essentially prove you are good to be milked for monthly payments before they add to your payments chain.

The world is not as simple or cut and dried as it used to be and we have to accept that. Those who run finance have Zero honour.

I think the relaxing of the mortgage rules in the 1980's fuelled house price rises.
When we got our first house I think the rule was three times the main wage earners money plus one (or half) the secondary wage earners money that was set as your mortgage limit.
These days cheap money and massive mortgages seem to be the norm.
And of course cheap money means bigger borrowing and bigger debt; things seem to be skewed against saving and for spending.

Suff wrote:Oh you can get a high credit score, but you need either a property or to take long term finance and pay for at least half the term before paying it off.

Not true. I have a credit score knocking on 900 and, as a tenant, I do not own a house nor do I have any finance. I am a saver. I buy and pay on the day, yet I am bombarded by credit companies with the best "deals" out there, day after day after day.

This happens to all of us all the time and many fools fall for it, then they find themselves in so much debt that they cannot afford to pay it back. Hence the "debt time bomb".

Two things need to happen, and sharpish. We need to get back to teaching personal finance in schools, as was the case in my day in the 60s (Home Economics), and we need to tighten up the laws on lending.

The "free market" in money, and the borrowing culture surrounding it, has to end. It might hurt the economy for a short while, but in the long run going debt free will benefit us all.

Cromwell, the latest is that 40 year mortgages are on the rise and that borrowers could be paying upwards of £200,000 more in interest for a basic property. Why would anyone with a brain cell go for such a deal? Oh, because they can, and have been told by the media economists to get in quick while they can.

Re my personal credit score: Due to the recent attempt at my identity theft I was advised by the police and Action Fraud to register with a credit score agency to see if there was any activity on my accounts - that's how I know my score and is why I now get bombarded with all these super deals. Credit (debt) is all too easy.

When I bought my first house in 1960, a semi with garage I just managed to get a mortgage as I could only get three timess my salary. Then chabged jos and started working
for insurance comanies and got a low rate of interest. This was at the time when some mortgage interest rates reached 12%.
A lot of internet sales suggest you make monthly payments usuing Karma even for small amounts. I refuseto do this and pay the full amount n a credit card
Grand-daughter, whois 26and working is very careful with money.Puts as musc as possible eachmonth into a savings account. Has said one of her friends never has any money left in her
current account at the end of te month.
I am fortunate that I have savings and my state pension and company pension is more than enough to cover my living expenses. I have also bought recently a new
TV, vacuum cleaner and lawn mower.

Workingman wrote:

Suff wrote:Oh you can get a high credit score, but you need either a property or to take long term finance and pay for at least half the term before paying it off.

Not true. I have a credit score knocking on 900 and, as a tenant, I do not own a house nor do I have any finance. I am a saver. I buy and pay on the day, yet I am bombarded by credit companies with the best "deals" out there, day after day after day.

Yes I forgot the other valid bit. I am not on the electoral roll and I don't pay council tax in my name.

It makes a bigger difference than you think. I am generally offered 1-2 weeks of income on credit. No more.

My current main credit card worked out my monthly disposable income then offered me half of it as a credit limit. That is not a credit card, that is more like a charge card. Remember them?

So they throw money at people who fall into the category of being able to be easily prosecuted in the case of a default, those who are not don't get hassled to take credit.