Britain’s Next Credit Crunch on the Books Already

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Let’s imagine that you’re a thirty-something, just bought the first house and now it’s 2016. The elections in the UK will have taken place, leaving the country in disarray because there will be a hung parliament yet again and the Conservatives will have probably tied the noose with UKIP and Mr. Farrage. Europe will be teetering on implosion because even the French will be wanting to get out of it after voting for Marine Le Pen and the anti-European Front National (always surprising how you can be against something and yet work in it). But, there are worse things happening. That thirty-something will be experiencing the second credit-crunch in their so-far short life. They’ll be suffering from the consequences of yet an over-inflated real-estate market that will have fuelled nothing but the bank accounts of the richest.

Crunch Time

Crunch time will hit in Spring 2016 according to some economists in the UK. That’s the time when the British will suffer the consequences of the rising annual house-price rate in the country standing at 17% per year. Oh, the people are rejoicing that their houses are worth hundreds of thousands and increasing every year. They are rejoicing that the Cameron government has got the unemployment rate to below 7%. But what about the part-time workers, Mr. Cameron? That was the point that the Governor of the Bank of England, MarkCarney stated that he would raise interest rates. Raising interest rates might be a recipe for disaster some will say, but Carney’s not there to take political decisions; he should be taking and implementing policies that are independent of politics. If only it were true, however! The people are rejoicing but they will be the ones that end up with egg on their faces.

When the key rate of the Bank of England reaches 3%, which according to the Deputy Governor of the BankCharlie Bean will take place in about 2018 (after rising in small increments over the next few years), then one in every three borrowers in the UK will be at breaking point in their finances.

The Resolution Foundation in the UK has calculated that there will be 770, 000 households in the country that will find it impossible to remortgage and to renegotiate their loans for property because they will be low-income or self-employed people. Perhaps the difference this time round will be the mere fact that the governments around the world have done everything in their means to shore up the banks and make them money rich. It’s not the banks that will stop lending this time because they won’t have the money. It’s simply the banks that won’t lend because they won’t trust your solvability. The second credit crunch in the UK will be just the one that gets felt by the ordinary person. What will ensue will be red-letters, final warnings, repossession, forced sale and the collapse yet again of the market. The politicians, including populist scare-mongering UKIP will be standing around saying “oh, my, my, whatever happened this time?”. They will never learn.

• The UK’s Financial Stability report in November 2016 showed that 16% of mortgage debt was owned by households that are cash-strapped with only £200 at the end of the month after paying out all bills. 
• Those very same households have a mortgage to the tune of £100, 000 and they have a borrowing rate of3.6% (variable, of course).

But, it won’t just be the mortgage-borrowers that won’t be able to pay; it will be the entire country. The British borrowed all over the country in the great years prior to the 2007 crash. They were earning so much that the good times were supposed to never end. Borrow today and keep borrowing a I’ll always have the money to pay it back was the order of the day back then. But, it wasn’t like that. Then, even when the credit-crunch came the lenders (loan sharks) were granting just under 50% of all loans for property to people without even asking them to prove their income. But, even David Cameron has confused debt and deficit of the UK, telling people that he is “paying down Britain’s debts”. His administration is making an attempt to down just the deficit; British debt will continue to rise and will explode with the 2016 credit crunch.

• National Debt stood at £1,185 billion in 2012/2013.
• That’s £18,606 per person in the UK. 
• In 2013, the UK coalition government borrowed £91.5 billion, but it only invested £23.7 billion in big projects to boost the economy.

The last on out needs to turn out the lights, please.

Originally posted: Britain’s Next Credit Crunch on the Books Already

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