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Tuesday, July 31, 2007

U.K. Consumers Cut Back on Beer, Shoes as Mortgage Crunch Looms

" About 2 million discounts will end during the next 18 months, the council said. The wave of refinancing threatens to slow consumer spending, which has boosted U.K. economic growth almost every quarter for the past decade, and may hurt stocks of retailers such as Tesco Plc and Marks & Spencer Group Plc. "

This is the exact same thing as in the US. The teaser rates are coming to an end with the same consequences...

" Ben Craster says he'll be drinking less beer this summer, and Christine Baines is cutting back on clothes and cosmetics. They're among the millions of Britons preparing for a mortgage crunch. "

UK home owneres went on a borrowing and spending binge that rivals the one in the US.

" Britain's borrowing binge has helped keep its economy growing for 60 consecutive quarters. The ratio of consumer debt to income in the U.K. is 1.62, the highest in the G-7, according to the National Institute for Economic and Social Research in London. "

This excess has to unwind. Real estate prices will fall sharply, but the debt burden will remain. The economic consequences will significant and it will take many years to work this debt off.

" Surging house prices have buoyed consumer spending as home- owners borrow against the value of their properties. Central bank policy makers, led by Governor Mervyn King, said the economy may cool, "possibly quite sharply,'' later this year, according to minutes of the July 4-5 rate meeting. "

Source: U.K. Consumers Cut Back on Beer, Shoes as Mortgage Crunch Looms (http://www.bloomberg.com/apps/news?pid=20601109&sid=ajbnu9l2U8XA&refer=home)