Fashion Contrast

Britons reduced their outstanding mortgage debt by £4.91 billion during the third quarter of the year, figures showed today.

The amount of money people unlocked from their homes was negative for the sixth quarter in a row, as the economic downturn, combined with recent house price falls, caused homeowners to focus on repaying their debt. But the rate at which people are paying down their mortgage slowed for the third consecutive quarter, according to the Bank of England. The level of repayments peaked in the final quarter of last year, when homeowners injected £7.6 billion back into their properties.

Consumers’ focus on paying down their mortgages is in stark contrast to previous years, when people released equity from their properties to fund large purchases. The rate at which people unlocked money from their homes peaked during the final quarter of 2003, when a record £17.03 billion was released. But since homeowners stopped unlocking equity in the second quarter of 2008, they have repaid a total of £33.89 billion.

Equity withdrawal enables homeowners to cash in on rising house prices by increasing their mortgages to convert some of the rise in the value of their home into cash. The money is typically used to fund big purchases such as cars or home improvements, or for debt consolidation. But while people feel confident about increasing the size of their mortgage debt when house prices are booming, they are far less inclined to do so when they are falling and unemployment is rising, leading to the current trend to reduce mortgage debt.

House prices have also fallen by around 20 per cent from their peak to their trough earlier this year, leaving many people with insufficient equity to withdraw. It has also become more difficult for people to increase the size of their mortgage after banks and building societies tightened their lending criteria in the wake of the credit crunch. But while people’s focus on paying off their debts may be more prudent than tapping into their housing wealth to supplement their spending, it is bad news for the economy.

Today’s figures show that households spent the equivalent of 2 per cent of their post-tax income on reducing their mortgages. This is a far cry from the final quarter of 2003, when homeowners boosted their income by around 8.5 per cent through releasing money that was tied up in their homes.

Howard Archer, chief UK and European economist at IHS Global Insight, said:

“The sixth successive, and still marked, net injection of housing equity in the third quarter of 2009 is the consequence of the increased desire of many people to improve their personal balance sheets given the worrying economic situation.

“Furthermore, recent extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages.”

Great news it seems from the Independent on the current state of the UKs economy in terms of house buying and people seemingly ‘settling’ down and paying back there first time buyer mortgages which they probably took out a few years back expecting to get a great interest rate. Whether they did remains a mystery, but it seems that it all seems to be settling down.

This is probably the image they would like to project:

Refs: Independent – Homeowners concentrate on repaying mortgage debt

Its winter now and obviously its getting colder as the days go on and for many, especially the old being able to maintain a warm house is very much a priority.

Personally I have a fairly good deal at the flat I live – The gas is included in the rent as-well as the water rates. Which means I can pretty much leave the heating on year round at no added cost to myself or my partner. Which means the flat is generally warm all winter. Because im fairly sad and generally do not think much of global warming I tend to take most of my clothes off and sit in a very warm house watching TV, its nice and I simply do not care what anyone thinks of my OTT waste of natural resources.

For many the winter is a time where literally they either cannot heat the home or manage to heat the home for a large percentage of the time, until the bill arrives from the local gas/electricity supplier for an amount they simply cannot pay. I honestly dread to think what my bill would be if I was in this situation…

A programmable thermostat seems to be one of those inventions which people need in their lives, not just for the heating benefits that it brings. More relevant in fact are the financial savings that it allows for.

Thermostats have been around for a long time, but the programmable version is fairly new on the scene. And what an asset it has turned out to be in the battle to reduce energy costs. Before the programmable thermostat era, we were more dependent on our memory or self-discipline to remember to switch the thermostat on or off, in order to reduce our heating bills. The truth was that many heating systems or water heaters would run on for hours because the owner could not be bothered getting up from a warm bed or comfy armchair to switch them off, or simply forgot about this important task. After all, they had nothing for comparison on how much a programmable thermostat could save them, so they were remained unaware. However since this simple but highly effective energy saving tool has hit the market, comparisons are being made, and the fact is that a programmable thermostat will represent a total return on investment in just a matter of weeks!

Embarrassingly for many the above paragraph will unfortunately strike a chord. Key in my mind to saving money is using products like comparison sites for finding whatever product you need at the lowest price.

My conclusion to this issue which currently doesn’t effect me is perhaps the best Idea would be to switch and save to a thermostat and save lots of money!

Most people feel fairly sorry for anyone who has the ‘pleasure’ of living in the country of North Korea and living under its fairly tyrannical leader Kim Jong-Il.

This week its been pretty bad I guess for those living under North Korean rule as it appears the currency has started being devalued.

From Korea Times comes this report.

A North Korea watcher said Tuesday that Pyongyang’s reported revaluation of its currency was aimed at increasing the wealth of the nation and beefing up state-run companies.According to reports, the secretive state suddenly removed two zeros from the nominal value of banknotes Monday to curb inflation and black marketeering. The adjustment was the first in 17 years…

“An individual is reportedly allowed to exchange up to 100,000 won (about $86) for the new banknotes,” said Park Hyeong-jung, a senior research fellow at the Korea Institute for National Unification (KINU). “The measure negatively affects the middle class who possess the North Korean currency and only benefits those who have foreign currency”

A North Korean foreign trading official based in China reportedly said the reclusive state set the exchange rate as 100 to 1 and accordingly, the old denomination of 1,000 won is replaced by the new 10 won. According to North Korea’s fixed exchange rate before the revaluation, a U.S. dollar was equivalent to 135 North Korean won.

Black markets in Pyongyang have turned chaotic as people rushed to convert the local currency into Chinese yuan or the U.S. dollar,” the official was quoted as saying by Yonhap News. The new bill will likely be put into circulation from this Sunday, according to a report.

Reports are also emerging of a ‘growing dissent’ in North Korea (quite rightly so!) after this ‘revaluation’ of the currency, as it appears to be wiping out many peoples life long savings in the name of simply ‘survival’.

In a clearly stupid idea, North Korean troops have been told to shoot (kill) anyone trying to defect to China. It also appears that the Stalinist state is basically reevaluating the currency in a bid to clamp down on ‘free market economy’ and to tighten the regimes grip on this impoverished country.

Thankfully Kim Jong-Il had the right idea last night as he (did he?) decided the nightly national news should instead “Not Cover” the huge problems facing the country economically, rather cover his visit to a PICKLE PLANT. The reporter said these comical lines.

“Comrade Kim is determined to supply ‘good’ food products to the people… Kim says a supply of nutritious pickles to the people of the North is essential”

However countries such as South Korea and Japan are watching closely to see whether the revaluation will trigger serious unrest in the the Communist regime.

If you dont know much about North Korea and would like to see what life is like on the inside – I heartily recommend checking out the video(s) create by Vice Magazines video department as apparently they where the only western journalist allowed in a while back – It makes for funny viewing. The video can be found on the video site which is here.

I believe at some point some kind of serious Western involvement needs to take place.

Refs:

• ABC Net – “North Korea Savings lost as Currency revalued“
• Economic Policy Journal – “Major North Korean Currency Devaluation“