Debt & credit – Bank of England figures

The Bank of England has published its latest Trends in Lending report – its ‘assessment of the latest trends in lending to the UK economy’.

It’s split into three sections: ‘Lending to UK businesses’, ‘Mortgage lending’ and ‘Consumer credit’. Most people are likely to be more interested in the second and third sections…

Mortgage lending

Gross lending for house purchase (the total amount lent out, regardless of how much people repaid) in April was much the same as in March, although approvals were slightly down. The number of mortgage products advertised, however, has grown over recent months.

The latest Lending to Individuals figures from the Bank of England show that UK residents were collectively carrying £1.239tn of secured debt at the end of March.

Consumer credit

When it comes to unsecured debt, lenders reported that there was no significant change in either availability of or demand for credit in April.

At the end of March, according to the Bank’s latest Lending to Individuals figures, UK residents were collectively carrying £221.7bn of unsecured debt.

Looking back over the last 12 months, what has changed in consumer credit is the net lending – the amount of money lent out minus the amount repaid. All the way from July to November last year, people collectively repaid more unsecured debt than they took on (which means the net lending figures were negative).

But that hasn’t happened since November. From December to March, people borrowed £400m more than they repaid every month, on average. Even so, this is nowhere near the levels we saw before the credit crunch – in 2006, for example, people took on more than £1bn of extra debt (on average) every month.

Dealing with debt

So – according to the Bank, people are currently carrying around £1.24tn of secured debt, and over £200bn of unsecured debt.

The Council of Mortgage Lenders (CML) has commented on the relatively low numbers of repossessions – interest rates are low, lenders are working with borrowers to keep them in their homes, and unemployment hasn’t risen as sharply as expected. In fact, they’re hoping that their prediction of 53,000 repossessions this year will turn out to be pessimistic.

When it comes to unsecured debt, a lot of people are falling behind on their payments. Insolvencies are at an all-time high, but many people will find they can tackle their debt problems without entering an IVA (Individual Voluntary Arrangement) or bankruptcy – possibly by entering a debt management plan.

Debt management

Some may be able to negotiate with their unsecured lenders and agree on a new repayment plan that lets them clear their debt at a rate they can realistically afford. They may choose to do this themselves, or they may enter a debt management plan, asking a debt management company to negotiate with their lenders on their behalf.

There are drawbacks to either approach – repaying a debt more slowly can end up costing them more in total and can damage their credit rating, whether or not they actually join a professional debt management plan. Nonetheless, debt management can be the best way of clearing their debts without being declared insolvent.

What You Need to Know About the 2010 Economy

On any given night when you turn on the television or get on the internet, you’ll be overloaded with information about different sectors of the economy and how it’s performing as a whole. It’s easy to get lost in all of the economic news, especially when you don’t even know what’s important and what’s not. Here’s a quick look at the basics of the economy and what you can expect in the near future.

Jobs

Employment is the most important issue concerning Americans today. Without real job growth, the housing crisis and foreclosures will continue into the near future. As of today, 33 states have run out of unemployment benefits although a bill has been passed extending the period. Personal income rates have dropped in 42 states, and Alan Greenspan believes unemployment rates will grow to above 10 percent. It is currently just below those levels now. Despite hiring on many part-time census workers, the employment picture continues to be weak and only a slight recovery is expected for the rest of the year.

Health Care

Despite a heated debate in both houses, the final version of the health bill has yet to materialize. The main objectives of the bill force health insurance companies to take on new patients regardless of preexisting conditions. It is also attempting to introduce a mandate that forces all citizens to have at least some form of health insurance or to pay a yearly penalty. Some health insurance companies have reportedly already found loopholes in the system that will allow them to deny coverage, forcing lawmakers to rethink the final bill. Nothing has been agreed upon despite much time spent on its legislation.

Housing

Thanks to the homebuyer tax credit, where new homebuyers would receive an $8,000 tax credit and those upgrading could receive $6,500, housing sales showed stronger first quarter results. The tax credit expired April 30, forcing many to move quickly to take advantage of it. Foreclosures also dropped in more than half of the country’s worst hit spots, a possible signal that the housing market is finally reaching a bottom. Home values also saw a slight increase in 10 major metropolitan areas. The real question is whether this uptick in home buying activity can continue.

National Debt

At the writing of this article (April 30, 2010), the national debt clock is officially at $12,902,913,650,000.00. That translates to roughly $41,735 per citizen, or $117,318 per taxpayer. United States federal spending is at $3,553,682,902,xxx.xx and the budget deficit is at $1,425,555,129,xxx.xx. In short, that’s a whole lot of money we don’t have. With our manufacturing base moving overseas and corporate hiring continuing to slow, it will be a long time before we ever see a surplus again if ever.

Stock Market

Despite the turbulent economy and the U.S. emerging from the most severe recession it’s ever experienced, the stock market is doing quite well with the Dow Jones Industrial Average having just recently broken through the 11,000 mark. The S&P 500, which tracks the top U.S. companies, is also performing well at 1,187 at last check. The Nasdaq is at 2,461. Despite how the economy is performing as a whole, it’s best to remember that all markets and economies are cyclical. By being diligent about saving and investing, you’re likely to come out on top once the greater economy recovers.