Shocked at levels of unsecured debt

[talks2much]

Hi,

Off work for a few days and pondering the recent budget and the state of the economy. I recently started working in a new job where I get to see mortgage applications and data relating to affordability assessments. I have been STAGGERED by the levels of unsecured debt that I have seen and this has made me think that it needs to be much better regulated.

About 50% of the applications that we receive are from people looking to remortgage to raise funds to pay off debts etc. Some of the amounts I have seen are just unbelievable. I have seen applications from couples on high incomes, asking to borrow more to pay off eye watering levels of unsecured debts - debt's higher than my first mortgage was! Many Many examples of people in 6 figures of unsecured debt. How did this happen and why were these people allowed to keep borrowing? Couples of 100K a year plus, owing the same on credit cards and loans. The system must be broken

A further worry if that the recent employer NI rises means that there will almost certainly be job losses/hours cut - what's going to happen when all of these people can't pay these debts as their income has gone/reduced? What happens then?

Surely we need to massively reduce the amount that people can borrow on non-mortgage debt?

I agree with you but it sounds a bit boring and obsessive to talk about other people all the time.

Many people don't even earn £50k in three years, never mind being able to save that much.

Having zero debt is also a symptom of being savvy with what little money you have, saving until you can afford what you want, and not burdening yourself with 'want it now, pay later' debt.

@dottiehens I agree with your post with the exception of mentioning private schools-that is a choice, not a life essential - if things are that tight then maybe private school should be dropped - my son moved from private to state when our finances changed- didn't kill him- in fact he preferred the state comp.

@TheMoment it's one of the things I most disagree with- if child maintenance is regular and proven over initial say 12 months - then I think it should most certainly count as income for benefits purposes. If it changes- fair enough , reapply at that point. I have a lady I know well who does as little work as she can get away with , older kids, gets UC plus virtually all rent covered as Hoysing association and gets almost £900 a month maintenance on top- that's not fair on full time ( or as near as damn it) working single mums on modest ish incomes who can claim bugger all and get next to nothing from partners either

@Crikeyalmighty I think that one of the reasons it isn't taken into account is because they know that everybody would just use cash or just set up and fund a current account and give the debit card to their ex-partner.

It would take an entire change to the system with the money taken at source (which would only work for PAYE) and then paid to the recipient by the government. How would money be collected from the self-employed and those that work in the cash economy? What would happen if somebody didn't pay, but the parent caring for the children had their benefits reduced in the expectation that it was being paid?

Thanks @ThisOldThang. I signed up with Clearscore and all is fine - very boring and no outstanding contracts, debts etc. I have the Barclay Rewards card as supposed to be one of the best for spending abroad but might think about getting another at some point.

When I tried to get Barclays to raise the limit (this was 8 yrs ago), there was no talking to them and refused to do it - no reason given. They never suggest raising the limit etc so as a few have suggested, it’s probably Barclays specific.

Is your wage up to date? I once had that issue with Barclaycard and they thought I was still a student despite me being in my 30's.

I think you can edit your income via the Barclaycard website.

Totally agree with everything here

Yes it is. I have a current account with Barclays too but we use it for bills so not the one my salary is paid into. Maybe this is why. £2k a month is paid in and lots of deductions as used for all bills and shopping. Never considered this but for the credit card side of things, they will know I have a current account elsewhere.

So sorry to hear this. I'd recommend listening to the Ramsey Show podcast. You can get out of this and you will hear loads about this. Thankfully I'm not in this situation but I just love listening to it because he shares my views and I'm very interested in money and human behaviour

Maggie I can't quote your post so copying and pasting here;
'
This is the mantra of Robert Kiyosaki - who preaches pay yourself first and asset gaining is key to that.
It’s how real wealth grows and is true capitalism in action.
People will never get any real wealth when they don’t listen to these things and debts just grow….'

This is interesting I'll read up about Robert Kiyosaki also. I agree with this 100%

I don't think anyone is judging - maybe some are but I am certainly not and most of the comments I've read here are also not judging. However it IS the case that this is a societal problem of a terrible cycle that can often lead to people getting into a situation way above their heads that is utterly miserable and scary which can lead to horrible consequences.

Sure can. On the other hand I know many examples of this-

X bought a flat (£90k) at 23 on 110% mortgage. Paid off the 10% +, leveraged it to buy another flat, leveraged that to buy another flat. 2 always rented out mortgage paid. sold the trio at 35 for £950k.

was it sensible to have such high mortgage debt? No it was a big risk. Mortgage free at 35 though.

you wouldnt be able to do that now as mortgage lending is so strict, but financial risk is linked to reward and silly to pretend otherwise.

Aqua just to explain we are talking about consumer debt and not mortgage secured on property which is generally an equity building asset like you state.

No but then I’ve done home improvement work on credit cards and personal loans which I’ve then added onto the mortgage at remortgage time- they were more than paid for with the additional equity from the house.

Aqua. Fantastic - great investment

Motability doesn’t work like that. At the start, the PIP/DLA claimant chooses a car. Better cars require a deposit. It’s a one off payment. Then their whole Mobility component pays monthly. Then, after 3-5 years) the car is given back. 🙂

Just because you earn a lot, doesn't make you good with money, it probably even feeds the idea that you can even comfortably take on large debts/purchases because of high earnings and banks/credit cards etc will be throwing high credit limits too.

I am one of these people. We have two children in nursery four days a week which is £2,500 a month. Our mortgage of our first home is £2,500 a month (5.2% rate, bought last year for £485k). I can assure you we are rapidly going backwards financially with great ease.

I know it’s really hard but it will be over. You’ll be so happy when they get their free hours- go to school. Promise. Looking back we also had debt creep up in the nursery years. Eventually Put it on the mortgage 😂 but what else can you do? You’re not alone by any means

Your mortgage is huge for a house of that price - did you take out a 100% mortgage? My mortgage is half that but on house worth a similar amount. It's 250k.

What on earth does that have to do with anything?!?

@AquaPeer It sounds like the mortgage and the childcare costs are causing the poster to go into debt. It's not a great idea to take out a huge mortgage if the repayments cause you to have to take out unsecured debt to repay a secured debt.

She needs to live in a house: the childcare costs will last 3 years at this level. The mortgage is 25 years. £485k is not an expensive house at all in many parts of the uk.

its sounds like you bought your house a long time before that posters so it’s irrelevant really. I have a 380k mortgage at 1.8% and pay £1600 pcm so 2500 for 5.2% sounds perfectly legitimate to me.

Some quick maths and you'd need to have a mortgage of around £450k to be paying £2500 a month at that rate. I don't envy this situation, merely pointing out that that's a huge debt to be taking on when you already have £2500 in childcare costs every month.