Caught in the Undertow British Families, Drowning in Debt

For 30 years, the British economy has been on a steady climb skyward. Now it's being hit with a credit crisis that resembles the American subprime disaster. And just like across the pond, the victims are those who can least afford it.

It’s 4:30 p.m., and the television in a government-subsidized apartment in Gravesend, south of London in Kent, is showing an advertisement for hair dye. Nearby, a baby is sleeping in a stroller. The TV and the stroller are among the few things that still belong to Maxine King, aside from a mountain of debt.

Her doctor prescribed antidepressants, but King’s mood hasn’t particularly improved. This morning an abscessed molar had her screaming in pain, after a dentist pulled out a nerve. But the tooth is hardly the problem, says King. What’s worrying her is something else: her three small children, whose feet continue to grow. “I don’t know where I’m going to get the money for new shoes,” King murmurs.

She turns her swollen face away. Twenty-four years old, King has been fighting the undertow of poverty for a year. Poverty has won.

Her mistake lay in believing what banks and politicians in Great Britain have been advising for years. Conventional wisdom was to get a “foot on the property ladder” as quickly as possible. In other words, buy property, and do it early in life. And it was okay, they said, to take out a large amount of credit, because property values would continue to rise, just as they had nearly tripled in the preceding decade.

In the past year, however, the trend has reversed.. The decrease in property values began in the United States, and in the past few months the phenomenon has reached Spain, Ireland and Great Britain -- countries where a building boom produced a housing bubble that is now bursting.

After that bubble bursts, the next sound is often a quiet whimper at the kitchen table. With interest rates rising and the value of houses declining, the first to go bankrupt are those who had little capital to begin with and could only receive dubious credit. In the United States it’s called “subprime”: credit that’s risky, second-rate and expensive.

For years, banks bundled these credits together and then resold them, making first-rate profits. That bubble, too, has burst. Between March and June alone, 37,740 British homeowners had to turn their property back over to the banks. By the end of the year it’s likely to be 75,000.

More than a million people in Britain will have difficulties paying off their debt. After 15 years of economic boom, a word is on their lips again that the country thought it had struck from its vocabulary entirely: recession.

The television in the Kings’ apartment is now showing the Simpsons, perhaps the world’s most famous dysfunctional family. Maxine points to a framed picture just above the TV that shows a small boy and girl, her older two children, wearing the jerseys of the English national team. “We wanted a nest for the family,” she says, “and to stop throwing away money on rent.”

The Kings wanted to join the 70 percent of British citizens who own their own homes. Maxine’s partner Dave, a bus driver, promised he would work 90 hours a week so they could afford their house. His mother also gave the couple £10,000 ($19,600). The Kings didn’t have to look for long before they found a mortgage lender that told them a house for £168,000 ($329,400) would be no problem as long as they could pay £870 ($1,700) in interest each month. The company sent the young couple all the necessary papers -- including ones that should actually have gone to Dave’s boss, to show proof of his earnings. Just fill that out yourself and initial at the bottom, the nice banker told them.

The family had hardly moved into the house when Dave began to complain. Nothing but work, no time for his friends at the pub, and he hadn’t wanted the house anyway. The daily grind of making payments was smothering the dream. One morning, three weeks before the birth of their third child, Dave came home from the pub and said, “I’m leaving you. I can’t take it anymore.”

When Maxine wanted to sell the house and pay back the mortgage, the banker suddenly wasn’t so nice anymore. He wanted £9000 ($17,600) as penalty interest. When Maxine explained her unfortunate situation he said, “I’ll see you in court,” and hung up.

The legal proceedings have dragged on for months. Each day the house depreciates in value, and when it’s finally sold, Maxine guesses she will be left with £30,000 ($58,800) worth of debt. And her credit rating will be ruined, preventing her from ever borrowing money again.

Maxine climbs into a rusted Ford Fiesta and drives through Gravesend’s empty streets to a beige house at the end of a residential block. There she meets her mother, who has taken both of the older children for dinner. What remains of the family is gathered in front of the house, the one that caused all the trouble. “It was perfect,” says Maxine King. “A blue room for the boys and a pink room for the girl.”

It almost sounds as if she’s talking about something she could have bought at the Bluewater Shopping Centre. With a couple hundred shops, Bluewater is Britain’s biggest mall, and Maxine spent her teenage years hanging out there. She also met Dave at a hotdog stand at the mall, and the two often went shopping there together.

The relationship that formed from those happy shopping trips went well. Until the time came for the couple to buy not t-shirts and milkshakes, but a house.


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