And simultaneously; it shows that taking the advice from the Government of day; on how far you should extend yourself on a mortgage; is equally dumb !Biffer wrote: ↑Thu Oct 28, 2021 5:10 pmWhich proves the point that comparing household finances to government finances is dumb.shaggy wrote: ↑Thu Oct 28, 2021 5:54 amPoor analogy. Mortgages get paid off not permanently added to in an ever increasing fashion.I like neeps wrote: ↑Wed Oct 27, 2021 3:16 pm Quite funny from Jamie Powell at FT Alphaville (free and very good) on the metaphor of a household budget.
"Even as a simple metaphor, it’s also just plain wrong.
Households regularly borrow far in excess of their income. In the UK for instance, if you’re a good credit, you can get a mortgage at 4-4.5 times your salary. In household budget metaphor land, that would be a debt-to-GDP ratio of 400 to 450 per cent. While the current government likes to talk up the benefits of tightening its own belt, it is only too eager to encourage citizens to get on the housing ladder.
The current debt-to-GDP ratio in the UK? 106 per cent. Time to lever up."
The UK has done a decade + of austerity; & now has a Government that's increased taxes to a level unseen in decades; & wage growth is the worst in centuries.
There's always an element in mortgages; where you take a punt on wage growth & inflation; & hope things fall your way.
Right now the UK is odds on for the worst case scenario of stagflation; & I'd be buggered, if I'd be saddling myself with too much debt in those circumstances.