OK, let's tell it how it is with us.
My wife and I both work full time. Our combined net income is about £4k pm. We have 2 primary school aged kids (state school) and employ a Polish au pair for £75 pw. This is inexpensive childcare let alone for a child minder, cleaner, clothes washer and ironer. We've no family nearby. In fact I have little family left, my father having died 10 years ago aged 60 and darling sister having passed away earlier this year at the ripe old age of 39. My mother and stepfather live in Australia. My wife's aged mother is 130 miles away. So, hired help is essential if we are both to work full time.
We earn too much for tax credits. My wife's a teacher and contributes 15% to her final salary pension plan in order to try to make up for the years she was working abroad and a stay at home mum. I contribute nothing to my employer's group personal pension; can't afford to. Our rent is £1k pm and 3.5 years ago that represented a 3.5% gross yield for the landlord. There has been no rent increase since then.
So, accommodation is about 25% of net income. We thought we'd be able to save each month but the reality has been that we are struggling to make ends meet. We have two modest cars with a combined value of about £4k. We both work very close to home and therefore spend on petrol is tiny. Yes, we go out for a meal once every week or two and pay for a few activities for our kids but we've been overdrawn the last couple of months and are again now.
So here we are. Within a few weeks we'll know more or less which school my eldest will be going to (11+ exam results) and it will be crunch time. We decided to stay renting until we knew about the secondary school situation.
Buying something suitable (has to be 4 beds) will cost us £400k, no doubt about it. That doesn't get a palace, far from it. The kind of house I feel I deserve (yes, I know this is arrogant, but that's what I feel) would be nearer £500k.
I have cashed in my inheritance and, combined with equity from our sale 3.5 years ago, it gives us a deposit of over 200k. It seems there are still mortgages available at 5% for 10 years. This works out at around £1,200 pm or 30% of net income. Being middle aged we can't expect big pay rises (far from it - mortgage protection insurance would be essential for me at least) and we know from experience with a £1k pm accommodation cost that we will struggle with this. Furthermore, we'll have no savings and the prospect of helping our kids through college etc.
Looking around me, my work colleagues don't exactly seem to be finding it easy either. One's wife has gone back to work part-time at a supermarket rather earlier than I'm sure she wanted to do with a 12 month old baby. The other is taking on a weekend job as a security guard. A friend who works in sales and has in the past always appeared to be doing just fine thank you seemed rather less blase about money the last time we met.
My wife wonders how everyone is managing to survive. The only response I can think of is that they didn't sell their houses 3.5 years ago! It's not a flippant comment. They will have low mortgages and equity to release. Most will be in their first house, having had a flat previously. I hope they are happy where they are though because moving up the chain will be horribly difficult.
Compare this to those in their mid-50s. Two people on decent incomes were able to move up the ladder far more easily it seems to me. At similar stages in their lives their children seem to me to be living in much more inferior accommodation.
To cut a rambling post short, I just can't see how these house prices can be sustained. Sure, there's still plenty of credit available but I can see a situation where people are trapped not by negative equity but by excessive debt. If the economy hiccups and/or confidence takes a dive then surely it all falls down.
On a personal note, it makes me wonder what the point is of us both working so hard only to constantly struggle to get by. If the Australian house market keels over soon I'll be very tempted to head out there (we already have the passports) where we can buy outright and then struggle like hell to find work in order to pay for the remaining living costs.
21 November 2006
17 October 2006
IVA companies take a hammering
At the start of this month I looked into buying shares in one or more of the companies dealing with personal insolvency and IVAs - Debt Free Direct and the like.
I'm glad I dithered. Their shares have taken a hammering recently:
Accuma, ACG, up 21% in the last year, down 12% in the last 2 days.
Cleardebt, CLEA, down 10% in the last year, down 17% in the last 2 days.
Debt Free Direct, DFD, up 182% in the last year, down 13% in the last 2 days.
Debt Matters, DEBT, up 172% in the last year, down 12% in the last 2 days.
Debts.co.uk, DETS, down 4% in the last year, down 11% in the last 2 days.
No real accounting for it. An article in the Indie says there's a two track market developing where corporate debt management stocks are outperforming personal debt.
It goes on to point out that Debt Matters was forced into issuing a statement saying it didn't know of any reason for the share price falls.
Could it be the market thinks the Great British Consumer might not get so badly burnt by debt after all, or is this just an example of how a bubble that formed in the share prices of these companies is bursting?
I'm glad I dithered. Their shares have taken a hammering recently:
Accuma, ACG, up 21% in the last year, down 12% in the last 2 days.
Cleardebt, CLEA, down 10% in the last year, down 17% in the last 2 days.
Debt Free Direct, DFD, up 182% in the last year, down 13% in the last 2 days.
Debt Matters, DEBT, up 172% in the last year, down 12% in the last 2 days.
Debts.co.uk, DETS, down 4% in the last year, down 11% in the last 2 days.
No real accounting for it. An article in the Indie says there's a two track market developing where corporate debt management stocks are outperforming personal debt.
It goes on to point out that Debt Matters was forced into issuing a statement saying it didn't know of any reason for the share price falls.
Could it be the market thinks the Great British Consumer might not get so badly burnt by debt after all, or is this just an example of how a bubble that formed in the share prices of these companies is bursting?
16 October 2006
M4 Corridor an IVA Hotspot
So according to an article in the FT today, the credit rating agency Experian, the M4 corridor is a "major hotspot" for IVAs (Individual Voluntary Arrangements).
The thing is, it seems, the really poor have nothing to lose by going bankrupt so it's those to whom going bankrupt represents a significant social stigma who opt for the IVA route.
I live in the M4 corridor and I can't say it surprises me. I really can't see how a lot of people are managing to make ends meet while at the same time keeping up appearances.
I can think of a few reasons why the M4 corridor should be a hot spot. For a start, the area has plenty of decent jobs (especially in areas like IT and telecoms) and therefore attracts people both from other parts of the country and from overseas. People moving into an area from outside won't have local family support networks and therefore their cost of living is going to be higher. Of course, this area has high house prices, which adds to the burden. Finally, the IT and telecoms industries tend to be boom/bust so I can forsee a situation whereby the major bread winner loses their job.
Seems to me there's a credit crunch on its way.
The thing is, it seems, the really poor have nothing to lose by going bankrupt so it's those to whom going bankrupt represents a significant social stigma who opt for the IVA route.
I live in the M4 corridor and I can't say it surprises me. I really can't see how a lot of people are managing to make ends meet while at the same time keeping up appearances.
I can think of a few reasons why the M4 corridor should be a hot spot. For a start, the area has plenty of decent jobs (especially in areas like IT and telecoms) and therefore attracts people both from other parts of the country and from overseas. People moving into an area from outside won't have local family support networks and therefore their cost of living is going to be higher. Of course, this area has high house prices, which adds to the burden. Finally, the IT and telecoms industries tend to be boom/bust so I can forsee a situation whereby the major bread winner loses their job.
Seems to me there's a credit crunch on its way.
13 October 2006
What a difference 9 months makes
Back in January, I posted on how well Tony Blair had performed in the Commons. What a difference 9 months makes! This week he was well and truly trounced by David Cameron at Prime Minister's Questions. Still, Blair has dug a hole for himself by refusing to endorse Brown now after having done just that earlier in the year. Quite how he could hope to get away with this U-turn is beyond me.
As someone mentioned on the radio the other day though, it must be deeply galling to have pumped so much into the NHS over the last 9 years, only to have the Tories come out ahead of Labour in recent polls which seek to measure which party is trusted more with the health service.
As for Cameron, I don't have much time for the guy. As I heard that entertaining political duo Abbot and Portillo say on This Week last week, the shadow cabinet has something like 13 old Etonians in it, including Cameron himself. Furthermore, apparently, there are even more Etonians and their ilk working for Cameron as political advisors etc. Diane and Michael pointed out that an affable, self-deprecating manner was what distinguished the old Etonians from their peers and how, in meeting an old Etonian for the first time, it was easy to get sucked in by all this charm. This is what seems to be happening to the British public right now.
I had much more time for Cameron's predecessor, Michael Howard. He was a superb parliamentary performer and I think it's fair to say you knew where you were with him. As an ex-grammar school boy from less than affluent roots, I'm sure he doesn't have much time for the crowd who now dominate the Tory front bench.
Of course, Howard like the much derided Ming Campbell, had the great disadvantage of being an intellectual and the great British public has always hated intellectuals.
As someone mentioned on the radio the other day though, it must be deeply galling to have pumped so much into the NHS over the last 9 years, only to have the Tories come out ahead of Labour in recent polls which seek to measure which party is trusted more with the health service.
As for Cameron, I don't have much time for the guy. As I heard that entertaining political duo Abbot and Portillo say on This Week last week, the shadow cabinet has something like 13 old Etonians in it, including Cameron himself. Furthermore, apparently, there are even more Etonians and their ilk working for Cameron as political advisors etc. Diane and Michael pointed out that an affable, self-deprecating manner was what distinguished the old Etonians from their peers and how, in meeting an old Etonian for the first time, it was easy to get sucked in by all this charm. This is what seems to be happening to the British public right now.
I had much more time for Cameron's predecessor, Michael Howard. He was a superb parliamentary performer and I think it's fair to say you knew where you were with him. As an ex-grammar school boy from less than affluent roots, I'm sure he doesn't have much time for the crowd who now dominate the Tory front bench.
Of course, Howard like the much derided Ming Campbell, had the great disadvantage of being an intellectual and the great British public has always hated intellectuals.
Why Felix Randal?
You know, I forgot to mention why this site is called Felix Randal. It's named after a poem written by one of my favourite poets, Gerard Manley Hopkins. Here it is:
FELIX RANDAL the farrier, O he is dead then? my duty all ended,
Who have watched his mould of man, big-boned and hardy-handsome
Pining, pining, till time when reason rambled in it and some
Fatal four disorders, fleshed there, all contended?
Sickness broke him. Impatient he cursed at first, but mended
Being anointed and all; though a heavenlier heart began some
Months earlier, since I had our sweet reprieve and ransom
Tendered to him. Ah well, God rest him all road ever he offended!
This seeing the sick endears them to us, us too it endears.
My tongue had taught thee comfort, touch had quenched thy tears,
Thy tears that touched my heart, child, Felix, poor Felix Randal;
How far from then forethought of, all thy more boisterous years,
When thou at the random grim forge, powerful amidst peers,
Didst fettle for the great grey drayhorse his bright and battering sandal!
I love that last line. It encapsulates Hopkins' style; all that alliteration and the sheer exhuberance shown in using "fettle" as a verb which must have been a pretty rare use of it even then.
Binsey Poplars is probably my favourite poem by Gerard Manley Hopkins. This is just superb. The line After-comers cannot guess the beauty been is one of those which pops into my head quite often. I suppose it's one of those oft thought but ne'er so well expressed type of phrases. Anyhow, here's the poem:
MY aspens dear, whose airy cages quelled,
Quelled or quenched in leaves the leaping sun,
All felled, felled, are all felled;
Of a fresh and following folded rank
Not spared, not one
That dandled a sandalled
Shadow that swam or sank
On meadow and river and wind-wandering weed-winding bank.
O if we but knew what we do
When we delve or hew—
Hack and rack the growing green!
Since country is so tender
To touch, her being só slender,
That, like this sleek and seeing ball
But a prick will make no eye at all,
Where we, even where we mean
To mend her we end her,
When we hew or delve:
After-comers cannot guess the beauty been.
Ten or twelve, only ten or twelve
Strokes of havoc únselve
The sweet especial scene,
Rural scene, a rural scene,
Sweet especial rural scene.
FELIX RANDAL the farrier, O he is dead then? my duty all ended,
Who have watched his mould of man, big-boned and hardy-handsome
Pining, pining, till time when reason rambled in it and some
Fatal four disorders, fleshed there, all contended?
Sickness broke him. Impatient he cursed at first, but mended
Being anointed and all; though a heavenlier heart began some
Months earlier, since I had our sweet reprieve and ransom
Tendered to him. Ah well, God rest him all road ever he offended!
This seeing the sick endears them to us, us too it endears.
My tongue had taught thee comfort, touch had quenched thy tears,
Thy tears that touched my heart, child, Felix, poor Felix Randal;
How far from then forethought of, all thy more boisterous years,
When thou at the random grim forge, powerful amidst peers,
Didst fettle for the great grey drayhorse his bright and battering sandal!
I love that last line. It encapsulates Hopkins' style; all that alliteration and the sheer exhuberance shown in using "fettle" as a verb which must have been a pretty rare use of it even then.
Binsey Poplars is probably my favourite poem by Gerard Manley Hopkins. This is just superb. The line After-comers cannot guess the beauty been is one of those which pops into my head quite often. I suppose it's one of those oft thought but ne'er so well expressed type of phrases. Anyhow, here's the poem:
MY aspens dear, whose airy cages quelled,
Quelled or quenched in leaves the leaping sun,
All felled, felled, are all felled;
Of a fresh and following folded rank
Not spared, not one
That dandled a sandalled
Shadow that swam or sank
On meadow and river and wind-wandering weed-winding bank.
O if we but knew what we do
When we delve or hew—
Hack and rack the growing green!
Since country is so tender
To touch, her being só slender,
That, like this sleek and seeing ball
But a prick will make no eye at all,
Where we, even where we mean
To mend her we end her,
When we hew or delve:
After-comers cannot guess the beauty been.
Ten or twelve, only ten or twelve
Strokes of havoc únselve
The sweet especial scene,
Rural scene, a rural scene,
Sweet especial rural scene.
11 October 2006
Why I think house prices will crash
I'm a bear when it comes to house prices. I was convinced back in 2003 that they were ripe for a correction, having risen enormously since around 1996, which happened to be when I bought.
So, my wife and I made a very brave (follhardy?) decision. In May 03 we sold our house, shoved the equity into a savings account and have been renting ever since. I'll come clean and say that I regret that decision now because house prices have continued their upward trajectory, all be it at a slower pace.
If I'd invested in a stock market tracker instead of opting for the savings account, I would have doubled my money. I certainly would have no regrets if I'd had the bottle to do that! The other plus side is that we have a bigger house in a better area on which the landlord makes all of 3.5% gross yield and we've been able to save the interest on our savings.
Now, of course, we've reached the stage where we want to buy back into the market but I for one am nervous about buying in at the top of one of the biggest asset price bubbles in history.
So why do I think that it still might all end in tears?
I don't think that interest rates are going to shoot up to 8% or 10% anytime soon. I believe the historical average is about 5% and that's where we're almost certainly going to be in a month's time. I believe that what will precipitate the fall will be the ever-increasing indebtedness that many people have got into and an end to the easy lending that has got us into this position.
A recent blog in the Grauniad blog by Ann Pettifor put some flesh on the bones of this. She quotes research done by Elizabeth Warren of Harvard University that shows that fully 75% of middle class America's family income is earmarked for recurrent monthly expenses; today's family has no margin for error....Their basic situation is far riskier than that of their parents a generation earlier. That phrase about the lack of margin for error echoed many articles I've read recently about the finances of many families.
A few days ago, some research by KDB really caught my eye. It shows that household disposable wealth in the UK has fallen significantly (outside of London) during the first half of the year. In the South-East, for example, it fell 14% and in Scotland it collapsed by 26%.
The Torygraph used this research as the basis for an article which points out that While house prices rose by 5pc from mid 2005 to mid 2006, this was dwarfed by a 15pc rise in mortgage advances ... Home equity extraction is now running at a staggering rate of £50bn a year... equivalent to 4pc of GDP, and all has to be repaid. The KDB findings are ominous, suggesting that household finances are even more stretched than previously thought.
This research confirms that here in the UK we're having to MEW ever deeper into what equity remains in our houses. I'm sure that many families' income is largely eaten up by essentials, just like in the USA.
Meanwhile, more and more people are defaulting on their unsecured loans which has led to the banks tightening their criteria for unsecured lending and having to continually raise their provision for bad debt. The debt spiral has also led to a whole bunch of companies like Debt Free Direct springing up in order to help those who are up to their eyeballs in debt "manage" it by the use of IVRs (Individual Voluntary Arrangements) and bankruptcy. The response has been an outcry from the banks and threats that they will tighten criteria further so as not to get caught out again. Whether these are just idle threats remains to be seen.
This is why I've come to the conclusion that it won't take an interest rate hike to say 8% to precipitate the credit crunch and a consequent house price crash. The fall in disposable wealth shows that many people must be accumulating debt even at current interest rates, ie, they are either carrying on spending or simply can't eat into their debt mountain. Compounding interest even at the current level could well be forcing equity withdrawal and unsecured borrowing.
This ever-increasing indebtedness must surely be what triggers the eventual correction.
So, my wife and I made a very brave (follhardy?) decision. In May 03 we sold our house, shoved the equity into a savings account and have been renting ever since. I'll come clean and say that I regret that decision now because house prices have continued their upward trajectory, all be it at a slower pace.
If I'd invested in a stock market tracker instead of opting for the savings account, I would have doubled my money. I certainly would have no regrets if I'd had the bottle to do that! The other plus side is that we have a bigger house in a better area on which the landlord makes all of 3.5% gross yield and we've been able to save the interest on our savings.
Now, of course, we've reached the stage where we want to buy back into the market but I for one am nervous about buying in at the top of one of the biggest asset price bubbles in history.
So why do I think that it still might all end in tears?
I don't think that interest rates are going to shoot up to 8% or 10% anytime soon. I believe the historical average is about 5% and that's where we're almost certainly going to be in a month's time. I believe that what will precipitate the fall will be the ever-increasing indebtedness that many people have got into and an end to the easy lending that has got us into this position.
A recent blog in the Grauniad blog by Ann Pettifor put some flesh on the bones of this. She quotes research done by Elizabeth Warren of Harvard University that shows that fully 75% of middle class America's family income is earmarked for recurrent monthly expenses; today's family has no margin for error....Their basic situation is far riskier than that of their parents a generation earlier. That phrase about the lack of margin for error echoed many articles I've read recently about the finances of many families.
A few days ago, some research by KDB really caught my eye. It shows that household disposable wealth in the UK has fallen significantly (outside of London) during the first half of the year. In the South-East, for example, it fell 14% and in Scotland it collapsed by 26%.
The Torygraph used this research as the basis for an article which points out that While house prices rose by 5pc from mid 2005 to mid 2006, this was dwarfed by a 15pc rise in mortgage advances ... Home equity extraction is now running at a staggering rate of £50bn a year... equivalent to 4pc of GDP, and all has to be repaid. The KDB findings are ominous, suggesting that household finances are even more stretched than previously thought.
This research confirms that here in the UK we're having to MEW ever deeper into what equity remains in our houses. I'm sure that many families' income is largely eaten up by essentials, just like in the USA.
Meanwhile, more and more people are defaulting on their unsecured loans which has led to the banks tightening their criteria for unsecured lending and having to continually raise their provision for bad debt. The debt spiral has also led to a whole bunch of companies like Debt Free Direct springing up in order to help those who are up to their eyeballs in debt "manage" it by the use of IVRs (Individual Voluntary Arrangements) and bankruptcy. The response has been an outcry from the banks and threats that they will tighten criteria further so as not to get caught out again. Whether these are just idle threats remains to be seen.
This is why I've come to the conclusion that it won't take an interest rate hike to say 8% to precipitate the credit crunch and a consequent house price crash. The fall in disposable wealth shows that many people must be accumulating debt even at current interest rates, ie, they are either carrying on spending or simply can't eat into their debt mountain. Compounding interest even at the current level could well be forcing equity withdrawal and unsecured borrowing.
This ever-increasing indebtedness must surely be what triggers the eventual correction.
13 January 2006
A simple pleasure
A couple of pints on a Friday lunchtime is one simple pleasure that really cheers me up. You really can't beat it. That's because it's the end of the working week and your time is limited so you have to squeeze in as much enjoyment as possible. Of course, it also helps that a couple of pints on an empty stomach at the end of the morning has much more of an impact than those same two pints at 8pm.
So too, the conversation at the pub tends to be forward looking on a Friday lunchtime; the weekend is a few hours away and suddenly numerous options for a happier future exist.
That's escapism, eh?
So too, the conversation at the pub tends to be forward looking on a Friday lunchtime; the weekend is a few hours away and suddenly numerous options for a happier future exist.
That's escapism, eh?
12 January 2006
Tony Blair on Good Form
Tony Blair was on good form yesterday, I must say. Sir Menzies Campbell managed to ask a particularly daft question for someone in his position as acting leader of the Liberal Democrats. He questioned the Prime Minister about the high number of temporary headteachers in schools. That was a gift for someone with Blair's consumate skill as a parliamentary performer. Yes it was difficult, he quipped, to find permanent leaders for organisations, especially "failing ones".
Simon Hughes was next. Tomorrow he's likely to announce that he'll be running for the Lib Dem leadership. He asked a question about the NHS but Blair pounced on his apparent agreement with Labour policy. "If", he replied, "he is going to start backing our reforms I am going to start backing him rather than the other one". Blair was referring to Mark Oaten, the other already-declared contender. He then asked out loud "Where's the other one?" - a real case of Blair wanting to take on all-comers.
At one point he posed the question of how many other Lib Dem careers he could "sacrifice" in the same day!
I'm pretty sick of Blair but there's no doubt about it, he's a superb public speaker; the best I've seen. On Tuesday, he was on News Night defending his anti-social behaviour policies in front of an audience drawn from people who live on an estate in Swindon. He was calm and persuasive. I really can't think of another world leader who would agree to defending his policies in this kind of forum or who could pull it off, but Blair seems to revel in it.
I thought his speech at the last Labour party conference was stunning too. He has a good sense of humour and can be self-deprecating; that takes real confidence.As I say, I'm tired of his policies but as a political performer he has no equal.
The only thing that really irritates me, apart from the pregnant pauses, is his use of the glottal stop as a means of trying to appeal to the "man in the street". This doesn't give him the common touch, it is simply condescending to his audience.
Simon Hughes was next. Tomorrow he's likely to announce that he'll be running for the Lib Dem leadership. He asked a question about the NHS but Blair pounced on his apparent agreement with Labour policy. "If", he replied, "he is going to start backing our reforms I am going to start backing him rather than the other one". Blair was referring to Mark Oaten, the other already-declared contender. He then asked out loud "Where's the other one?" - a real case of Blair wanting to take on all-comers.
At one point he posed the question of how many other Lib Dem careers he could "sacrifice" in the same day!
I'm pretty sick of Blair but there's no doubt about it, he's a superb public speaker; the best I've seen. On Tuesday, he was on News Night defending his anti-social behaviour policies in front of an audience drawn from people who live on an estate in Swindon. He was calm and persuasive. I really can't think of another world leader who would agree to defending his policies in this kind of forum or who could pull it off, but Blair seems to revel in it.
I thought his speech at the last Labour party conference was stunning too. He has a good sense of humour and can be self-deprecating; that takes real confidence.As I say, I'm tired of his policies but as a political performer he has no equal.
The only thing that really irritates me, apart from the pregnant pauses, is his use of the glottal stop as a means of trying to appeal to the "man in the street". This doesn't give him the common touch, it is simply condescending to his audience.
11 January 2006
Why did I start a blog?
I contribute to various discussion boards anyway so why start a blog of my own? I believe it's egotistical to start a blog and this has put me off starting one till now.
In the end, I suppose I've admitted to myself that yes, this is egotistical but what the heck! Nobody is being forced to read this after all.
I think this blog will contain, in the most part, diary type entries containing my opinions. I could though end up using it as an aide memoir. Who knows?
In the end, I suppose I've admitted to myself that yes, this is egotistical but what the heck! Nobody is being forced to read this after all.
I think this blog will contain, in the most part, diary type entries containing my opinions. I could though end up using it as an aide memoir. Who knows?
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