Minimum Credit Card Payments in the UK A Cause for Concern

Minimum credit Card Payments in the UK A Cause for Concern
Minimum Credit Card Payments in the UK A Cause for Concern

Growth prospects in the United Kingdom currently 3% seems very speculative to start talking about a recession in the United Kingdom. However, some factors that cause a problem.

Reasons for the crisis

1. Fall on the savings rate.

Excluding contributions of the national pension savings fell below 0. This means that we borrow more than they save. This is dangerous because this means that this household is stretched. While there was strong growth in consumer spending in January, but the growth in consumer spending is likely to be unbearable. A limit to the number of consumers can generate more loans.

2. Very low savings rate are often a precursor to recession.

The last time the UK has a savings rate is so low in 1989. Two years later the United Kingdom entered into recession as consumers sought to boost their economies after years of borrowing and spending.

3. Withdrawal of Equity mortgage

Many loans have been funded by an increase in Mortgage Equity Withdrawal. In 2006 MEW rose to  £ 14.6bn or 6.7% of revenues. The withdrawal of capital is often to consolidate other debts, as loans on credit cards. However, this means that if housing prices were to fall to those who had followed the release of capital could be vulnerable to negative equity.

4. United Kingdom sensitive to interest rates higher.

High levels of debt means that important sectors of the population is very sensitive to increases in interest rates.

5. Inflationary pressures are expected to increase

due to several factors, such as rising commodity prices. Therefore, to keep inflation near the government's goal was 2% may need more interest rate. Even a small rate increase Interest of 0.5% could make affordable mortgage payments for many homeowners. This decrease in consumer spending could lead to a recession.

UK unlikely because of the recession:

1. It is not on paper.

Inflation is still the target of governments, so there is no reason that the Mediterranean countries to increase interest rates at very high (as in 1991 when it reached 15%). Many economists are predicting interest rates will soon peak. Also of real interest rates remain relatively low. (Real interest rate = interest rate, inflation)

2. Growth is strong.

With the forecast growth in the United Kingdom currently 3% seems very speculative to begin talking about a recession in the United Kingdom. However, there are certain factors that make a point of concern.

In 2.7% of the economy is growing near its rate of long-term trend, there is no obvious reason for this change in the short to medium term.

3. The low savings rate not cause a recession.

In 1989 the economic situation was different.

4. The world economy is growing rapidly.

Despite concerns about the U.S. housing market The OECD noted that the global economy is one of its best years of economic growth.

5. The  £ is overvalued.

Therefore, the possibility a devaluation of the £ Â It would improve the competitiveness of exporters in the United Kingdom.

R.Pettinger manages a site about mortgages in the UK. This site includes a guide to different types of mortgages and news about UK mortgage News and the UK economy. http://www.mortgageguideuk.co.uk/

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