View Full Version : The Credit Crunch
A few years ago I started this thread on the forthcoming housing crash (http://www.soapboards.co.uk/forums/showthread.php?t=40777). The situation has grown much worse with the crisis in the banking sector caused by, IMHO, greed.
Unfortunately, the actions of a few have impacted all of us. No-one knows how severe this recession is going to be but when comparisons are made to 1929, we could be facing a depression.
I can remember the recession of the late 80s where the news would have a weekly tally of the number of jobs lost. In 2009 I believe things will get much worse and any recovery is going to be late 2011 if we are lucky.
One of the reasons we are in this situation is down to low interest rates and easy credit leading to debt. What's the Governments response to the situation? Lower rates in order to encourage us to borrow and spend which caused the problem in the first place. Maybe its part of a cunning strategy to send us to the 1970s.
Good luck to everyone in keeping their jobs/houses. I fear the social cost of this recession will be high.
I know Im not in full time work or anything but even I think maybe Im starting to feel the effects
Cos I work at a pub as a waitress things have been very slow so they have been cutting back and I only worked once a week anyway so thats even worse for me
Im sure its far worse for other people
Personally as a student because I dont buy a lot at the moment and live at home, and the money I do earn mainly from babysitting, I can save or cos there have been so mnay sales I can buy more clothes and not feel like ive spent too much, if that makes sense
I know so many people personally who have either been made redundant or had their wages cut. To be honest this recession seems to be really hitting home with the middle class white collar workers in a way I don't feel that we have seen before. In the late 70s early 80s it was all car workers, steel men and miners who seemed hardest hit. Now it is bankers, estate agents, insurance agents, people who work in R & D as well as car workers and loads of sales people. It just seems more wide spread.
A close friends husband was told to accept a 20% pay cut or to leave, my husbands company have laid off a number of people too. It seems nearer somehow.
Luckily we didn't manage to buy the house we were after last year which would have involved us taking out a huge mortgage - our current house is paid for so although it is falling in value we are in no danger of losing it. Our shares have fallen badly - the value is only 20% what it was in the spring.
We are in a relatively good position though, but the falling pound has made the cost of holidays in Europe and USA much higher, too and I think that there will be a definite change in our holiday plans for next year.
Thats a good point about holidays, were were gonna go somewhere cheap in europe but now we are looking elsewhere
Saw on the news this evening that the pound has fallen even further against the euro. It's now £1 to EU1.05.
i blame it on this culture of buy now spend later, credit cards and easy money.
my parents told me how when they were starting out they only brought what they could afford (except for mortgages) if everyone had stuck to this then we wouldn't be in the situation we're in now!
When my husband and I were starting out everything we had was second hand, and we replaced things gradually as time went on.
We don't have any debt, however I have friends who had to have everything perfect right from the start - without saving and without working for it. Remarkably, the debts lasted longer than the marriages in some cases. Really, being prudent financially is probably the best thing you can do to protect a relationship - money problems breed discontent and arguments.
moonstorm
18-12-2008, 08:28
We are in a bit of a funny position in Gibraltar. As yet the crunch hasn't hit us but and the big but is, because Gibraltar is so small and land is a premium, houses are very expensive, most people can't afford to buy a house here. So they live just across the boarder in Spain. Now can you imagine getting paid in Pounds (which is still our currency) and having to pay you rent, mortgage, bills, etc in Euors. We are getting 1.04Euors to the pound at the moment compared with 1.42 only a couple of months ago. It is same same as taking a massive cut in salary. The only up point for Gibraltar is that people are now spending all there money here as Spain is now too expensive so that is staving off the crunch for at least a little while here but as we rely on the financial sector for many of our jobs I don't think it will be long before we are hit hard.
I am like that Bry... I only spend what I have and nothing more.. I don't own a credit card (I have debt card that only allows me to spend what I actually have). I have never bought a TV in my life (usually my friend who have to have the newest invention pass things down to me).. I save as much as I can each week and I don't over spend on my kids at christmas.. they get what they asked for and nothing more. I don't believe in get that much into debt for one day.
I like been financially stable, I owe nothing, I own nothing and I work hard for everything I get.
So who do you blame then?
Individuals for borrowing too much on credit?
Banks for lax lending practices?
FSA for not regulating the banks (especially the dodgy investment vehicles)?
The Govt for not checking that its own body, the FSA, is doing its job?
Gordon Brown for thinking he is a economic genius by abolishing boom and bust where in reality he rode the biggest credit bubble in history?
I don't think it is gordon brown.. it is happening everywhere...
I kinda blame banks for 100% + mortgages, encouraging people especially the young to borrow that much money for a house.
I don't think it is gordon brown.. it is happening everywhere...
I kinda blame banks for 100% + mortgages, encouraging people especially the young to borrow that much money for a house.
Gordon Brown said in 1997 that he would "not let the housing market put the stability of the economy at risk" (or words to that effect). He knew then the risks of easy credit and did nothing about it. I agree that its a global problem, but global in the sense that its only affected the countries that relaxed their lending practices.
That is true... My own personal bank never did 100% mortgages, it is probably a reason I never went for one...
I read over here that they are taken €4000 per tax payer (from the gov pensions) to give to bale out banks and lenders.. All I can says it that it better be back for when I am retired.. I didn't borrow a whole heap of money from any bank so I am annoyed I have to bale them out
We are all paying for the bonuses bankers and investment brokers received for being reckless with our money!
The way I see it the bigger the risk the bigger the return - so those that risked the most made the most in the boom years. Who got the bonuses - the risk takers.
When times are bad, and risk takers lose money, who pays - we do!
They get their money regardless - it is a scandal
It is like gambling - the banker always wins.
Yup, I'd agree with that Shari.
I can see where the pressure comes to buy a house and then a second house. When I was in Livi my cousins kept on telling myself and the wife to buy a house otherwise I'd miss the boat. Renting is dead money etc. I told them I'd buy once the market had crashed. They thought I was nuts as "property only goes up". Last I heard, one cousin was struggling to pay a 300k mortgage, and the other was still in denial i.e. the credit crunch will only affect England and Scotland is immune.
Im not very good with this kind of stuff, I wouldnt know where to begin to start thinking about it properly
The property market in Livi/Edinburgh is at dead slow/stop.
The prices have not fallen sharply, but it is obvious that noone wants to pay the prices being asked. The prices are at the same level they were 12 -18 months ago, but it is more that they haven't moved than there has been a sharp decline.
Obviously there are some exception where people have been asking far too much and realised that if the want to move they have to be more realistic.
For those of you wanting to take the first step onto the housing ladder - I bought my second property in 1991 - and if hardly appreciated at all in the 9 years I owned it. That is what happens when you buy during a recession - first it goes down and then it goes up - slowly, to start with but then with cheap credit, banks pushing mortgages at people and people feeling more secure in their jobs the price increases eccelerate.
I would at this time only buy a house to live in, and I certainly wouldn't borrow over 90% to do so. Even at that level you are still at risk of negative equity.
Leave it until the redundancy announcements slow down (and believe me they are just starting now). I would say another 12 -18 months before the bottom is hit on this thing - and then I would buy.
Property has been good to a lot of people - but if you lose your job and your have to try to sell a house that is worth less than you paid for it in a sinking market you could be in debt for a very long time with nothing to show for it.
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