Rightmove has published November’s UK House Price figures, with a seasonally adjusted 0.5% MOM increase. Plus ca change.

Apart from a slight decrease in the rate of growth (a second derivative that newspapers would have surely pounced on if it were the other way around), the most interesting graph was at the back of the press release: Earnings Growth in the UK.

UK Earnings Growth 2001 to 2009

UK Earnings Growth 2001 to 2009

You can clearly see that earnings growth has taken quite a dive. Thus, with every increase in house prices cash is being transferred into bricks and mortar or additional debt load is being taken out. And yet at the same time the Brits are clearly worried about their financial exposure and are paying down unsecured debt at an unparalleled rate (http://www.guardian.co.uk/business/2009/nov/30/consumer-debt-bank-of-england). Furthermore, the money supply continues to contract:

Britons repaid debt for a fourth consecutive month in October and at the fastest pace on record, the Bank of England said . The Bank also released other data showing the money supply is still contracting in spite of £200bn of quantitative easing. People paid off nearly £600m of unsecured debt such as overdrafts and credit cards last month — three times as much as City pundits had expected — and twice the repayment rate of September. The figures show that the UK’s build-up of up to £228bn of unsecured debt in the decade before the credit crunch has now gone firmly into reverse, although since July consumers have only repaid £1.3bn of that total.

The figures also showed that new mortgage approvals inched up to 57,300 last month from 56,200 in September but remained well below the long-run average.

 More debt, more danger? Or are we paying down our exposure?


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