Debt free - Yes or No

[GD]

Yeah, I've just finished Fred Harrison's "Boom Bust House prices, banking and the depression of 2010".

Housing, in REAL terms should well go up... that is new builds, except for eco homes from local materials.

Also, what about the impact of zero or -ve population growth? Is it mentioned at all?

I'm undecided, what do people think about the next depression: will immigrants leave our shores as opportunity dries up? Or will they still be better off working here?

Back to the main part of the topic... It's the speculation in land that we won't be able to afford, as consumers reach the limit of increasing this year's debt to pay for last year's...

I think combining what Harrison has in view for the next few years (PO aside!) with Leeb's view of the .com bust (how close we came to "game over", sort of... I read his free chapter online) then this next bust is really going to hurt...

+ve side is reduced demand for energy, I suppose.

I certainly think that as energy costs increase, it will impact what people can afford on housing (especially in making bubbles out of the ground the bricks and mortar stand on), meaning peak oil, peak house prices.

[Totally_Baffled]

I certainly think that as energy costs increase, it will impact what people can afford on housing (especially in making bubbles out of the ground the bricks and mortar stand on), meaning peak oil, peak house prices.

On the issue of house prices , Im not sure a PO induced recession will maintain high house prices.

The simple reason is , no matter how skint the population , you still have 20 million houses that banks will want to sell , whatever the price. (assuming they're repoed)

They will not want millions of homes on their books, particularly if they're declining in value quickly (or at least thats their perception)

Therefore , my view (FWIW ), is that eventually we will see the mother of all house price crashes.

How far depends on how far peoples incomes drop.

[dr_doom]

I'm undecided, what do people think about the next depression: will immigrants leave our shores as opportunity dries up? Or will they still be better off working here?

Yes, almost certainly. Wages will drop in this country and house prices will have to fall in line with them.

What is the intrinsic value of a house?
In Thailand you can buy a reasonable sized house for ?10,000. The typical wage is ?3 / day.
The only thing supporting the ludicrous house prices we have in this country are relatively high-wages and lax lending standards.

Building materials won't be much of a factor in my opinion.
It will simply be a case of what's available and what people can afford to pay, or are able to borrow.
Which won't be much if they are struggling to afford enough food to sustain themselves.

[Joe]

I'm debt-free as of today

I don't own my own home anymore either, mind...

[Mean Mr Mustard]

Debt used to be a direct consequence of divorce, unemployment, illness,etc. Now it's stoked up by lenders and slick marketing by the likes of Carol Vorderman, and debtors in difficulty viewed (for now) as just acceptable commercial risk. Never mind the consequences. And when these reckless financial institutions start to suffer following the inevitable credit crunch, they'll be sure to pass the fallout onto the rest of their still solvent customers.

Take a look at http://www.creditaction.org.uk/debtstats.htm - this is regularly updated and gives the big picture on UK household debt.

As for Mr & Mrs Mustard? We're 45 and 47, fairly prudent and have always focused on what we owe versus our modest incomes, rather than any illusory 'equity' - hey, it's still debt, not money!!! We've always overpaid our mortgage, and will be debt free with our house and everything in it paid for in about 18 months time, and we'll start saving in gold before then too. Not to mention building up stockpiles of this and that to counter supply shocks. And I am so glad that Mrs Mustard knows how to cook, sew and she can even tell plants from weeds.

And that's another thing - most debt is now loaded on the younger hapless twentysomethings - student loans, sky high mortgages, peer pressure for latest brands, worse state and occupational pensions - and many don't know how to cook or tell plants from weeds. Even worse, they don't know about Peak Oil - yet.

Mustard

[XENG]

And that's another thing - most debt is now loaded on the younger hapless twentysomethings - student loans, sky high mortgages, peer pressure for latest brands, worse state and occupational pensions - and many don't know how to cook or tell plants from weeds. Even worse, they don't know about Peak Oil - yet.

As a hapless twenty-something the only thing from your list that applies to me is the student loan, which i was quite worried about in light of PO until christmas when my dad told me that he had heard a financial expert on Radio 4 saying that its actually better not to pay off your student loan until you absolutely have to because they have such low interest rates compared to other loans.
I was planning to get it paid off as quickly as possible but it really is better to delay repayment because you get a better interest rate on your money if its in a savings account, this is according to moneysavingexpert.com and it seems logical, all other debts should be paid off though and since i dont have any other debts and dont intend on getting into any i should be ok.

[Bozzio]

My wife and I reduced our mortgage from ?150K to ?35K in about four years. We started doing so even before we heard about peak oil. We are now building an extension at a cost of about ?60K so are heading into greater debt again.

Do we care? No, not at all.

I think we've stopped worrying so much about peak oil. Sure, it's going to happen and we are aware of it but we're not going to waste several years of our life abandoning all dreams (including having a better house) just for the sake of something which may not show full effect for a decade. And if all hell breaks loose tomorrow then we'll deal with it then. We have an offset mortgage and with a combined income of >?100K we usually have quite a lot of spare cash (no I'm not bragging) so if interest rates rise then so will our savings to offset the loan. If things get really bad then the banks can't make us all homeless overnight and I think the government will probably introduce emergency measures to reduce the chance of that happening anyway.

We really don't want to see PO happen at all. We're very happy with our existence and love our fairly recession proof jobs; I'm a plumber and my wife is a GP. Besides, I couldn't do without my Roland V-drums and electric guitar, although I think my wife could. As long as we monitor the economic climate and don't stretch ourselves any further financially then we should be OK. Fingers crossed.

[Totally_Baffled]

Well I was due to pay off the mortgage in 2008 (using an offset mortgage like you Bozzio).

However - the damn car died a death and so I have had to buy a new one (f**king old car still done me for ?900 on the way out grrr!)

Obviously I didnt buy brand new - but I spent 10K, given it could be the last one I ever drive depending on PO.

So the mortgage will now take until Autumn 2009, I will be so pissed if it goes tits up before then , so close!!!

Its interesting , ever since finding out about PO , I have looked after my finances more carefully. As a result it is finally dawning on me on how the systems kind of locks you into debt.

The end of the mortgage is a bit like the carrot on the stick, no matter how fast I chase it , it moves away the same rate because of rising interest rates, higher energy bills, food bills , lowe pay awards etc etc.

Once Im out of debt , I am staying out. The only way I can see me borrowing again is if the housing market crashes 90% and I can upgrade to a house and garden for a few grand (which I can afford from savings)

[Ballard]

I moved house and reduced debt from ?127,000 down to ?20,000, however including savings this is about ?3,000 in reality.

However I'm not totally anti-debt, I will borrow some more next year to build an eco-type extension and do my low energy improvements. I consider this an investment because it should reduce future running costs and thus add to the value of the property (if we are right about the future). However I intend to keep this well below my annual earnings and a number that I could pay back quickly if required.

I think a little debt is ok, just don?t go mad.

[Mean Mr Mustard]

And that's another thing - most debt is now loaded on the younger hapless twentysomethings - student loans, sky high mortgages, peer pressure for latest brands, worse state and occupational pensions - and many don't know how to cook or tell plants from weeds. Even worse, they don't know about Peak Oil - yet.

As a hapless twenty-something the only thing from your list that applies to me is the student loan, which i was quite worried about in light of PO until christmas when my dad told me that he had heard a financial expert on Radio 4 saying that its actually better not to pay off your student loan until you absolutely have to because they have such low interest rates compared to other loans.
I was planning to get it paid off as quickly as possible but it really is better to delay repayment because you get a better interest rate on your money if its in a savings account, this is according to moneysavingexpert.com and it seems logical, all other debts should be paid off though and since i dont have any other debts and dont intend on getting into any i should be ok.

Well, that's one less hapless twentysomething to be concerned for. And yes - MSE is a cracking website, it saved me about ?350 in various ways this year. And I signed their petition against Carol Vorderman...

[brasso]

IMHO if you don't own your own property, then you're in debt to the tune of:

[annual rent] x [years left to live]

My goal is not only to be debt free, but to have no bills. This is a tall order I know! Gas bill? Convert to wood. Electric bill? Minimise usage and get a turbine. I guess I'm over-simplifying here, but this is my ideal at any rate.

[Andy Hunt]

IMHO if you don't own your own property, then you're in debt to the tune of:

[monthly rent] x [years left to live]

My goal is not only to be debt free, but to have no bills. This is a tall order I know! Gas bill? Convert to wood. Electric bill? Minimise usage and get a turbine. I guess I'm over-simplifying here, but this is my ideal at any rate.

This is my thinking, too. This is why I am concentrating on paying off my mortgage rather than selling up. It's not just no debts I'm after - it's no liabilities whatsoever - or at least, as few as possible.

If my only liabilities are Council Tax, food and fuel - and I have a wood stove and solar for hot water and electricity - then I should be able to weather the toughest times a crashed economy can throw at me.

[Adam1]

Since becoming PO aware, I've reduced my debts considerably and I am aiming for zero or very low debt.

In general though, high oil prices are likely to fuel (sorry! ) inflation. As long as you are not adding to your debts, inflation will reduce their real value. Of course, interest rates are very likely to rise with inflation. So a debt may be ok if:

• your source(s) of income is/are reasonably PO-resilient,
  your other living costs are low and
  the debt is, say, a mortgage with a fixed or capped interest rate and without a large redemption fee

...then some debt is OK. If not, best to eliminate it.

As well as dealing with debt, the trick will also be not to have any significant, currency-based savings, as the value of these will also be destroyed by high inflation. The real value of those Tessas/ISAs that have been built up slowly could largely be lost, even with a bout of 70s style inflation. Many of us on PowerSwitch seem still to be of working age but for people in retirement, who have probably already paid off their mortgages, the real problem is how to protect their savings and income in retirement.

[MisterE]

No debt here thank god Plus I have achieved the first misson towards being a millionaire which is - being able to comfortably survive on the dole! Which is no easy task - if most people lost their jobs it would be curtains for them - starting life as a tradesmen soon teaches you that work comes and goes and to invest, save your money and even hide your money