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Thought experiment.

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 pasbury 18:02 Sun

Thought experiment:

What would happen if everyone cancelled the direct debits for their mortgage repayments at the same time and refused to ever pay them again?

I see it as the biggest constraint on my entire life. And by extension on the lives of everyone living in a Western late capitalist world, even those renting.

Post edited at 18:04
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 jkarran 18:23 Sun
In reply to Longsufferingropeholder:

More like The Purge. No rules, no order.

Jk

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 Eric9Points 18:25 Sun
In reply to pasbury:

The crash of 2007 was started by people in the US defaulting on their mortgages.

We put money into banks, they lend it out, often as mortgages. If all those mortgages (debts) go bad then the banks lose all their money which means lots of people lose their money because the money in the banks belongs to lenders not the banks.

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 wercat 18:28 Sun
In reply to pasbury:

> particularly those renting.

very true. plus those renting are treated far more harshly for benefits purposes as they aren't allowed to have any assets other than the home they don't own

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In reply to pasbury:

i agree some people on the uk climbing forums (not you) need to experiment with thinking

Post edited at 18:30
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 pasbury 18:46 Sun
In reply to Longsufferingropeholder:

You see none of that makes any sense to me. It's finance, which I don't understand and don't want to understand because it makes no sense.

Why do houses cost so much? Why is rent so high? Why have they changed so much? Why is that usually toward higher cost rather than lower?

I just don't understand. But I have to live in this shitty straightjacket.

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In reply to pasbury:

No you don't 

Sell up and go live in a bin.

Houses are expensive because of a combination of supply, demand and available credit. Alternatively, houses are cheap because of a combination of supply, demand and available credit. 

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In reply to Eric9Points:

>We put money into banks, they lend it out.....

Stop right there - thats a common but fundamental misunderstanding of the financial system.

Someone wants to borrow money from a house - so the bank 𝘤𝘳𝘦𝘢𝘵𝘦𝘴 new money based on the value of their promise to pay it back.

This sounds ridiculous when you first hear it - but its true.

https://www.bankofengland.co.uk/knowledgebank/how-is-money-created

https://www.youtube.com/watch?v=4AC6RSau7r8&

Post edited at 19:06
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In reply to scott culyer:

> i agree some people on the uk climbing forums (not you) need to experiment with thinking

Did that once mate. Never again...

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 Timmd 19:04 Sun
In reply to pasbury:

I gather that it's (not exclusively) partly to do with there being a shortage of housing, and partly to do with developers sitting on their land which has consent for housing to be built, in that if the development happens at enough of a trickle it maintains it's value - if demand is higher than available supply it does. I read about the land issue in Private Eye a few years ago.

Post edited at 19:08
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 pasbury 20:28 Sun
In reply to bouldery bits:

Houses are expensive.

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In reply to pasbury:

> Why have they changed so much?

Partly supply and demand. But certainly, a large part due to lenders prepared to lend larger sums to those who can only just pay it. Hence the significant increase in the salary multiple that lenders will lend. Because they make more money this way.

If the borrowers default, the lenders think that they will not lose money, in a rising housing market. The flaw with this argument was exposed with the 2008 sub-prime crash...

Post edited at 21:34
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 pasbury 23:05 Sun
In reply to bouldery bits:

Just to be clear, I can live with my mortgage. I signed up because I needed a house for our family to live in. I work the way I do in large part to pay for that.

As I said it was a thought experiment not a complaint.

So what would happen if all mortgages were suddenly written off?

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In reply to pasbury:

> So what would happen if all mortgages were suddenly written off?

That’s a different question to the OP and probably warrants its own thread 

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 Sir Chasm 23:14 Sun
In reply to pasbury:

> So what would happen if all mortgages were suddenly written off?

No institution would sell mortgages, so most people would be unable to buy somewhere to live. Those who could afford to buy/own property outright would do a lot of business. 

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In reply to Timmd:

Just like OPEC then 

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In reply to pasbury:

> So what would happen if all mortgages were suddenly written off?

My retirement pension will pay me a lot less 

I want to know what’s going happen when the monuments to the society shut aka  the INTU  of this year 

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 pasbury 23:57 Sun
In reply to Eric9Points:

> The crash of 2007 was started by people in the US defaulting on their mortgages.

> We put money into banks, they lend it out, often as mortgages. If all those mortgages (debts) go bad then the banks lose all their money which means lots of people lose their money because the money in the banks belongs to lenders not the banks.

I'd like to know more about the differences between this model (which I think you've made more simplistic than it actually is) and the model which used to be used by building societies. Why were they all floated and what effect did that have on house price inflation and who was getting the benefit of all that mortgage interest.

I'm genuinely an ignoramus about all this stuff but can't help thinking we've all been had in some way.

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In reply to pasbury:

> What would happen if everyone cancelled the direct debits for their mortgage repayments at the same time and refused to ever pay them again?

> I see it as the biggest constraint on my entire life. And by extension on the lives of everyone living in a Western late capitalist world, even those renting.

"What would happen"? When you have a mortgage, who holds the deeds to your house - the bank, or you? -- The bank. I thought so. If you stop paying your mortgage, you will be out in the street 

"The biggest constraint" on your life? Maybe, but what's your point? If everyone stops paying, no places to live will be available. Where will you live then?

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 henwardian 04:54 Mon
In reply to pasbury:

I think other people have made it pretty obvious what the swift sideways kick you suggested to the jenga tower that is the economy would lead to so perhaps you are looking at this from the wrong direction?

Do you need such a big house for you and your family?

Are there not cheaper areas nearby where you could buy a house/flat for a lot less?

Why buy a house at all? - have you thought about a static caravan or other alternatives to traditional bricks and mortar?

How about just doing vanlife with your family in a larger mobile home parked up somewhere secluded and peaceful?

Have you looked at getting a better-paying job that will let you pay off your mortgage a lot quicker?

Does your partner (if you have one) work? If not, could you both work and pay off the mortgage in doubletime? (viability might depend on the age of your children.)

Could you buy a fixer-upper, pull double time working and then fixing the house up in the evenings and weekends and sell it for a profit and move up the housing ladder with a minimal/no mortgage that way? (can you stand living in a building site? is also a pertinent question!)

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 Blunderbuss 06:13 Mon
In reply to pasbury:

Sell up and go and live as a farmer, living in a mud hut in Africa if you think 'you have been had'.... 

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In reply to Eric9Points:

> We put money into banks, they lend it out, often as mortgages. If all those mortgages (debts) go bad then the banks lose all their money which means lots of people lose their money because the money in the banks belongs to lenders not the banks.

In a pure capitalist system the banks would be allowed to fail. It is part of the process and necessary to stop wealth concentrating and accumulating in fewer and fewer hands.  Like rebooting an old Windows PC.

If government step in to protect banks they are effectively giving money to the wealthy.  Someone who has a billion or a million pounds gets far more benefit from government protecting their savings than someone who doesn't have any savings.  The central bank actions to protect savings and push up the stock market during crises are like inverse income tax - the more you've got the more you gain from them.  The wealth of billionaires has actually increased during the Covid pandemic and the only force that would explain that is central bank intervention.

Personally, I think that if government is going to protect banks then there needs to be a strong countervening force to stop wealth concentration and that should be taxing wealth rather than income.   Income taxes stop people getting rich and take money away from young people trying to grow a business. Wealth taxes stop older passive investors and wealthy families staying rich.

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 Timmd 12:50 Mon
In reply to Name Changed 34:

> Just like OPEC then 

I guess it's not as strategic as the way OPEC look at the price of a barrel of oil, but yes.

Post edited at 12:55
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 pasbury 17:58 Mon
In reply to profitofdoom:

You seem to have missed the ‘thought experiment’ part of my post. I’m just asking a hypothetical question. So what would happen if the banks foreclosed on everyone at once, tried to evict everyone (with an outstanding mortgage) onto the street? My post was more like a writing prompt really.

The ‘places’ will still be available, the bricks and mortar.

Who would really lose out?
I don’t know. Does anyone?

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 pasbury 18:25 Mon
In reply to henwardian:

> I think other people have made it pretty obvious what the swift sideways kick you suggested to the jenga tower that is the economy would lead to so perhaps you are looking at this from the wrong direction?

> Do you need such a big house for you and your family?

It isn't that big a house.

> Are there not cheaper areas nearby where you could buy a house/flat for a lot less?

Yes but commute would be longer, maybe that will be less of an issue post covid but at the time it seemed the perfect balance.

> Why buy a house at all? - have you thought about a static caravan or other alternatives to traditional bricks and mortar?

Living in a house is not exactly an extravagant lifestyle choice is it?

> How about just doing vanlife with your family in a larger mobile home parked up somewhere secluded and peaceful?

Because it would be shit.

> Have you looked at getting a better-paying job that will let you pay off your mortgage a lot quicker?

Yes but I'm quite well paid as it is.

> Does your partner (if you have one) work? If not, could you both work and pay off the mortgage in doubletime? (viability might depend on the age of your children.)

Yes she works part time. We have tried to balance our work and parental lives with, I think, great success. It was one of my points that we should not have to work all hours of every day just to pay for a non extravagant lifestyle. 

> Could you buy a fixer-upper, pull double time working and then fixing the house up in the evenings and weekends and sell it for a profit and move up the housing ladder with a minimal/no mortgage that way? (can you stand living in a building site? is also a pertinent question!)

I'm 55, too knackered to do much DIY at all and quite satisfied with the state of house as it is.

Your post seems quite patronising and written from a privileged position.

I'm just a normal bloke making ends meet.

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 pasbury 19:35 Mon
In reply to tom_in_edinburgh:

You are right, unfortunately all the power in the world right now is directed into resisting any taxation on wealth. Concentration of wealth is killing us all.

Post edited at 19:36
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 SteveX 20:17 Mon
In reply to pasbury:

Well buy a cheaper house maybe a cottage in Lancashire

https://www.rightmove.co.uk/property-for-sale/property-93903902.html

or 

something handy for El Chorro

https://www.idealista.com/en/inmueble/85439342/

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 Alyson30 20:25 Mon
In reply to pasbury:

> Thought experiment:

> What would happen if everyone cancelled the direct debits for their mortgage repayments at the same time and refused to ever pay them again?

Well the banks would collapse and everybody who lose their deposits.
So basically the people who didn’t repay their debt would get to keep their assets and everybody else would get screwed.

> I see it as the biggest constraint on my entire life.

If you don’t want to repay your debts just don’t take on debt.

Post edited at 20:30
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 Alyson30 20:28 Mon
In reply to wercat:

> > particularly those renting.

> very true. plus those renting are treated far more harshly for benefits purposes as they aren't allowed to have any assets other than the home they don't own

It’s a completely ridiculous system, someone who takes on debt to buy a house and lose their job get their benefits and keep their house, but if you do the right thing and save instead of going into debt then you’re expected to run down your savings before you can claim.

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 charliesdad 20:38 Mon
In reply to pasbury:

It’s a very good question and in truth no-one knows what would happen, but I’m happy to speculate;

1 Banks would be forced to write off the debt - as you have guessed, they could not foreclose on everyone’s mortgage and throw the majority of the population on the street

2 Banks would become insolvent, but - as with the 2008 financial crisis - Central banks would create new money to fill the void and prevent the collapse of the current economic system. 

3 The net effect would be to transfer wealth from the financial sector to the people; freed from having to pay a mortgage, people would have more cash to spend in the “real” economy, as well as a substantial pot of capital.

I’m in favour - when do we start?!

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 Alyson30 20:53 Mon
In reply to charliesdad:

> It’s a very good question and in truth no-one knows what would happen, but I’m happy to speculate;

> 1 Banks would be forced to write off the debt - as you have guessed, they could not foreclose on everyone’s mortgage and throw the majority of the population on the street

> 2 Banks would become insolvent, but - as with the 2008 financial crisis - Central banks would create new money to fill the void and prevent the collapse of the current economic system. 

> 3 The net effect would be to transfer wealth from the financial sector to the people; freed from having to pay a mortgage, people would have more cash to spend in the “real” economy, as well as a substantial pot of capital.

The net effect would be mostly to transfer wealth from people who hold savings to the people who have taken on debt.

We would be rewarding completely the wrong behaviour. 
 

And the people who rent and save would get screwed over and over whilst those taking on debt would be getting their house for free.

Post edited at 20:55
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 Philip 21:12 Mon
In reply to pasbury:

> Why do houses cost so much? Why is rent so high? Why have they changed so much? Why is that usually toward higher cost rather than lower?

This could be fixed.

Here is the problem. Land suitable or approved for builder is "worth more" but it invariable the less productive farm land. The approval process adds value from nothing. That value then gets stuck in the house price.

If, the state compulsory purchased land at a fair but not unrealistic price and then tendered for the building of properties you would solve part of that. By not requiring the developers to outlay on the land you would encourage smaller firms to bid for the work. Houses would not need to be so crammed to pay for the costs of land. Gardens would be large enough for wildlife. Houses would be built with care.

The purchaser would pay for the house and the fraction of land (back to government). Mortgages would be more affordable. Banks would still make money on mortgage and providing builders with financial services.

The system we have that builds near identical houses on tiny footprints to lowest cost per m² is a disgrace.

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 Alyson30 22:03 Mon
In reply to pasbury:

> I'm just a normal bloke making ends meet.

Actually, you have a house, which is a pretty big thing, a lot of people just rent flats on their own or flatshare and have no prospect of ever buying a house.

Maybe we help them first before we let you off your debt.

Post edited at 22:04
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 henwardian 02:40 Tue
In reply to pasbury:

> [other answers]

fair enough, the ideas suggested don't fit you for various reasons, that's fine.

> Your post seems quite patronising and written from a privileged position.

You seemed to be looking for an alternative to paying a mortgage, I think that everything I suggested was aimed at solving your problem for you. If you don't like any of the solutions, learn to live with the problem. I'm struck on looking through the thread just how many of your responses are variants of "I don't know/understand and I don't want to know/understand" and "I don't like that idea" which rather makes me wonder why you started the thread in the first place.

I would admit to being in a privileged position (most obviously because I'm male, white and highly educated) but having spent about half my working life working jobs that paid around the minimum wage and spent multiple periods of months to a year living out of a van (both while working a full time professional job and while just travelling) and most of the rest of my life living in a shared flat where I rented, I think I have plenty of relevant experience with which to offer suggestions about reducing living costs.

> I'm just a normal bloke making ends meet.

I think what you are is someone who came to this forum feeling grumpy about having to pay for a thing you want to possess (your house) and wanting everyone else to agree with you and reinforce your opinion about how unfair it all is. I think you dressed up this opinion to try and make it seem more reasonable and I think that you are too blinkered to be genuinely interested in the wider issues or possible alternatives.

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 pasbury 18:57 Tue
In reply to Alyson30:

> Actually, you have a house, which is a pretty big thing, a lot of people just rent flats on their own or flatshare and have no prospect of ever buying a house.

> Maybe we help them first before we let you off your debt.

I totally agree. Renting is more expensive than paying a mortgage. Maybe everyone should rent. There is certainly less emphasis on house ownership on some European countries than in this one.

You sound quite angry and I understand that. I don't want my debt to be written off. It was a thought experiment.

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 pasbury 18:58 Tue
In reply to henwardian:

You've really got the wrong end of the stick.

It's not about me it was a thought experiment.

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 henwardian 19:20 Tue
In reply to Alyson30:

> It’s a completely ridiculous system, someone who takes on debt to buy a house and lose their job get their benefits and keep their house, but if you do the right thing and save instead of going into debt then you’re expected to run down your savings before you can claim.


But the same arrangement is true of loads of other things. If you hold cash, you need to run it down before you can claim benefits. If you put your money in a pension fund, you can claim benefits and keep your pension fund. If you buy a car with your money, you can keep your car and claim benefits. In fact, as far as I'm aware you can use your money to buy vintage wine, stamps or an art collection and keep those and claim benefits (open to being corrected here).

In the end, there is no logic to arguing that buying a house vs saving cash is any different to any of the other things you could spend or invest your cash in (edit: Except stocks and shares which are considered as being like cash for this sort of stuff).

Final point: If you have a house and lose your job, you can't claim housing benefit, so actually someone who rents is much better off in this regard as they can get their rent paid for them and not worry about being foreclosed upon and forced out.

Post edited at 19:22
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 elsewhere 19:33 Tue
In reply to pasbury:

Without legal debt enforcement debts can only be enforced by violence. The only lenders are war lords or mob loan sharks. Nobody else will lend because it's optional for the borrower to pay back.

Without legal debt enforcement it's optional for an employer to pay you if they miss a salary payment. You and the employer could pay criminals to resolve the issue in favour of whoever pays more.

Without legal debt enforcement it is optional for the buyer to pay the invoice so the supplier has to pay a monster a cut to do debt collection.

Much as it's a nice idea to stick it to the man, without debt enforcement the economy is reduced to barter, organised crime or war lord rule.

Post edited at 19:38
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