Friday, 27 April 2007

Up to our eyes in debt, with our fingers stuffed in our ears

[...] Average interest paid by British households is £3,500 a year, according to Creditaction, a debt charity. Old Nick's calculator is in over-drive. Yet the experts still say, don't worry. Much of this debt is backed by property. House prices are going up; they always do. You know it makes sense.

Really? Am I alone in not understanding hocus-pocus economics? How can houses, some of which are being acquired on mortgages of six times the buyer's salary, keep increasing in price at a rate of more than twice income growth? The numbers add up only if you want them to - and plenty do. Which is why 34 per cent of mortgages taken out in January this year were "interest-only". More and more buyers are betting on house price inflation to rescue them.

Disbelief has been suspended. Whenever I mention rising interest rates, higher mortgage payments, creeping unemployment, the possibility of falling house prices, fingers are stuffed in ears, eyes are tightly shut and heads shake wildly. No, no, no. Go away. Read more

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