Betfair Official Blog

Neither A Borrower Nor A Lender Be

The only members of society who don't owe any money right now are the tramps...

Borrowing is up. Unsecured personal borrowing, mainly personal loans and overdrafts, rose by £2.4billion in February. That's the biggest monthly rise in five years.

And there's more. Just this month, there are planned rises in water bills, the TV licence, council tax (up by 4 per cent from April 1st) and road tax. Where do homeowners get the money from to meet these bills and satisfy mortgage demands? Answer - from expensive unsecured debt.

You can borrow secured debt if the bank will take on new business. However, the slight flaw in the plan is that the bank's business is funded by borrowing, and the cheap money is all gone at the minute. So sorry - no can do. Indeed, lenders appear to be vying to see who can offer the worst rates and in the process, attract the fewest customers (HSBC's First Direct bank has stopped offering mortgages at all.) That's not really playing fair and surely a token rate of 8/9% would have at least made First Direct look like they were trying.

Perhaps the best institution to borrow from is the Government, which of course has been taking more and more money out of your wallet. In 1997, the Government took 35.7% of GDP in tax; this tax year the figure will be 36.8%. However, writing a 'Dear Gordon...' letter is unlikely to work, even if you enclose a photocopy of your bank statement and a picture of your children spilling out of a tiny hatchback car. The PM may well thank you for being green in your choice of vehicle, and for supporting the postal service. But that will be the extent of it. Although if you tell him you've a rich relative on the way to that big housing estate in the sky, he may well follow up with a call.

The one person who can salve the festering sore that is debt is Mervyn King and his Monetary Policy Committee. Will he reduce interest rates? If he does, he runs the risk of fuelling inflation. If he doesn't, he runs the risk of doing nothing and looking like he's just hoping for the best.

Thankfully, you can do something by backing rates to rise or fall. The chance of a rise is smaller than Nicolas Sarkozy in a Leotard. The fall is the tip, with a quarter-point reduction the shrewd money. Although a half-point fall is well worth a peek.

As for the FTSE, Billionaire investor George Soros said that this financial crisis is the worst since the Great Depression, and the markets will fall once more this year after a brief rebound. Of course Soros is in the business of making money (a la Black Wednesday) and if markets do tumble, you know that he'll make a few quid. So just maybe he's talking it down for a reason? Says Soros, "The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years."