Why We're So Deeply In Debt
It was widely reported that as the country we collectively have a duty to higher level than ever before, and more many people start to have the problems holding them finance together. Level of personal bankruptcies and bankruptcies flies up, and banks should postpone ever the increasing sums of money to cover bad debts which clients don't compensate them.
Many financial experts predict debt crisis in the near future, and there is a conversation on serious influence to economy, as chickens come home to take seat on a perch. How we entered into this situation? Why our debts so highly?
- Easy credit
We are constantly filled up with advertizing and marketing of the message us, how easy it could should be to take out the credit, and how many performance so could change our lives to the best. Competition between creditors meant that many of them weakened the criteria of granting, accepting statements which they, probably, rejected in the previous times. Unite these two facts, and it is not enough surprise that the number of people which is taking out loans, increased sharply.
- Cheap credit
Interest rates, historically conversation, at very low levels. It means that we pay less in payments on our duty, facilitating to borrow bigger quantity. While interest rates remain low, it, probably, not, the problem, but indicators will inevitably raise during some moment which could be very bad messages validly for already stretched to a limit.
- High prices for real estate
Last decade or so saw that the mammoth grows in housing cost with the prices growing up year after year. It led to the increased duty in two excellent ways. First, the people buying their first house, should take out huge mortgages that be able provide of. Where, as soon as was normal to save the deposit, even it isn't realistic for many people, and thus, 100 % mortgages for a large number became more widespread.
Not only that the high prices mean more high mortgage duty, they also give feeling increased, rich to the people which properties doubled or trebled in value. To many people who bought buildings before property boom, now it was lucky to have an action large quantity in their house as their outstanding mortgage is much less, than value of their house. 'Transformation into cash' this action, taking out the loan provided on their house, is by sight easy way of receiving additional cash which will be used for a set of the purposes from consolidation before repair construction works and became more popular as our collective action increased.