UK Homes Now Worth Four Trillion Pounds

Property prices have tripled in a decade, but so have debts. You could start solving your debt problems with one simple phrase.

In the decade till the end of 2007, property prices have risen by more than three times to £4 trillion. Secured borrowing has almost tripled too, going from £430bn to £1.2 trillion in the same ten years. Unsecured debt has also tripled to £200bn.

All these things have tripled, but equity in property (i.e. the amount that we own and isn't mortgaged) has increased by just 2.3 times to £2.8 trillion in the same period.

What's interesting is that you can always find other stats that paint a different picture. The above are from Halifax, but the same bank also said that property prices increased by £320bn last year whereas mortgage balances went up just £120bn. It also said that our net-household wealth (which means our worth after deducting our debts) has doubled in ten years to £6.7 trillion.

Britain's Debt Mountain

So what really is the situation?

I have to come down more on the side of the doomsayers, but that's not so much because of statistics, it's because of what family, friends, friends of friends, and even our discussion-board community have been saying. Basically, it's pretty clear that everyone's up to their eyeballs in debt. 

And this has been building up for some time. During the past decade of easy credit, rather than admitting they can't afford something, people have borrowed more. First they dip into their overdraft, then they get a credit card. Then another one. And then they get a loan. Then a secured loan.

From anecdotal evidence, it seems to me that this all because many of you can't say to your friends: 'Sorry, I can't go out tonight. I need to watch the pennies. Want to have a drink at my place and watch a DVD instead?'

Just Say No

What's interesting is that when I have said this to my friends (I always balance the books, but have expensive months sometimes just like anyone else) they have often been relieved. 'Hey, yeah, I'm glad you said that. Me too, actually. Good idea.' The problem is, I'm sure that some of my friends are among the millions of people who do not balance the books each month. If so, then they should be first to make this suggestion and not wait for me.

As you probably know, lenders are making it harder to get loans now. Although they're doing it entirely for their own interests, it's in our interests too. Hopefully, it will force many people to say 'I can't afford it' before it's too late.

It's not a dirty phrase. It's a really simple one that I think everyone should be comfortable saying. If you see yourself mirrored by my friends, start trying it out. 'I can't afford it...' It's not so hard to say once you've said it a few times, and you'll get out of debt much quicker.

> Read our How To Get Out Of Debt Guide.
> Compare mortgages, but please don't borrow more than you can afford. 'I can't afford it', remember!