Is the credit crunch true?

[Kazz]

Come on is this credit crunch too, has anyone seen todays papers....

"Debt crisis for professionals" middle Britain hit by the credit crunch.

House sales to drop by up to 40pc....

More repossesions already this year May than the whole of last year.

So what does anyone think is there really a credit crunch?

[yola]

In my opinion there is a 'wobble' which is being dangerously talked up by the media. They really need to put a lid on all these headlines as real damage can be done if they continue.

It's good that it's happened to restore a bit of sense into an economy that was in danger of overheating as it's made people think twice about frivolous spending.

[Kazz]

Thats prety much my take on it Yola, but listening to people in the staff room at work you'd think it was the end of the World....I said to one of them "are you thinking of selling then?" she answered "No we've lived there 18 years we love it" So I enquired why she was so worried by the prices, when the house is now I would be 98% certain worth more than it was 18 years ago....and if she is not selling she's not seeing the money anyhow....and one of the lads was complaining he couldn't get a credit card with a limit greater than £1,500 I said "But you work 18 hours partime....why would you need more than that you're at college?"

Seems to me people are worried when there is no reason to be and if anything the so called tightening of credit limits is a good thing why loan more money to people than they can comfortably repay??

[EmmaG]

I think for some professionals who have perhaps maxed out on lending will find it very difficult over the next year or so. Unlikely to be able to remortgage or borrow more money.

We are lucky that we have a very small mortgage (and loads of equity in our property) and have very little debt.

[Kazz]

Think that may be another thing though Emma people seem to max out on credit then remortgage to get back on even keel so to speak are now unable to do that....catch 22.

[charliebubs]

I think there is definitely a crisis of sorts, but I do agree that the press are scaremongering.

I have certainly seen a lot of redundancies (sp!) in my area of work - both in residential and commercial property law - as there just isn't the work at the moment. The market has dried up and there are even estate agencies closing in my area. :(

Personally, I have also felt the pinch as well. I only bought this house last year, as you know, and I live on my own. With the cost of all utilities rising and my now large mortgage I have been left with a tight monthly budget. I'm just relieved that I have a lodger at the moment - as her rent really helps me out.

[EmmaG]

certainly is Kazz. I don't blame the banks/lenders being more carefull who they lend to, it is about time! but perhaps a bit too late for some people ??

[Kazz]

I think thats it..Emma its a terrible shame the amount of people who will suffer due to this "crisis" however...but agree also with you Charlie but its always tight when
you've brought a new house isn't it, and lots of people are finding it slightly tighter than they may have before.

[charliebubs]

Yeah, I guess it is always tight - maybe it just seems worse because of all the hype!

[angieh]

I am more worried personally about the rising cost of food, not only for myself but for all. With the cost of fuel sky-rocketing, and some basic foodstuffs worldwide such as wheat and rice getting in shorter supply due to the increase in bio fuel production, it won't be long before food not only becomes very expensive but may also become scarce. If something is not done to redress the balances, then that's when things become dangerous.

Sorry, doom and gloom all round.

[dandysmom]

Things are in bad shape here in the State also as I'm sure you know; careless lending to people who couldn't really afford the rates when they went up, etc. I'm not personally affected as my mortgage is paid off; and the drop in real estate value doesn't bother me as I have no plans to sell; it was just paper profit anyway. Foreclosures are way up, a good time to be a buyer....

I'm more concerned about the rising costs of food as Angie mentioned. Two small examples just from today's shopping: blueberry muffin up to $1.45 from $1.35 (flour and transportation costs), one large Granny Smith apple .... $1.18 (transport) !!

Charlie, it's always tight I think in the first years of a mortgage....that's when I learned a lot of low-cost peasant style recipes! Loads of pasta dishes, rice and beans, Chinese stir fries! Hang in there...

[Donna]

I think there is definitely a crisis of sorts, but I do agree that the press are scaremongering.

I have certainly seen a lot of redundancies (sp!) in my area of work - both in residential and commercial property law - as there just isn't the work at the moment. The market has dried up and there are even estate agencies closing in my area. :(

Personally, I have also felt the pinch as well. I only bought this house last year, as you know, and I live on my own. With the cost of all utilities rising and my now large mortgage I have been left with a tight monthly budget. I'm just relieved that I have a lodger at the moment - as her rent really helps me out.

I would say its true. My Estate Agency company is closing branches one by once since January .. the last time being today in Kent :( I am lucky to still be hanging on but there are NO BUYERS so we are really struggling. My food and petrol and utilities are much higher than six months ago. I am struggling and I dont have much debt.

There is definately a crisis.

[Kazz]

But doyou think the crisis has been caused by irresponsible lending previously...or.....

[Donna]

Irresponsible lending, stupid people borrowing too much ... it has to stop somewhere!

[yola]

Hopefully this will make people see sense. The greed of the majority is frightening . . . almost a case of I want so I will buy and stuff the consequences.

I'm guilty of that too. We have a huge mortgage which has been largely driven by supporting our business. However, I do like nice things too - but my car is my only real indulgence.

However, I've now cut right back and am actually managing to pay cards and loans off.

Thankfully at the moment, being a business-to-business company we're not being hit by the retail/housing slow down - quite the oposite; long may it last! But my brother who runs an on-line eco store is suffering :(

[bobbie3917]

i agree with Angie
its the price of food and the utilities that is worring me,
my Gas a few years ago when my kids were young and i had the heating on a lot was only about 4/8 (Summer/winter) per week, i have just had a bill and cos i pay on the card it has just gone up to 16 per week all year (so that means in the winter i am using more then 16 per week) its about the same with electric

FOOD well i have only noticed that cos im always skint, i bring home the same money as i did last year and a little bit more than i did the year before, and i dont spend my money on crap i dont often go out, my money is mostly food and bills, and well i must be spending about 30% more on food for the same amount, and i dont by a lot of prepacked stuff, fruit, veg, meat and fish

as long as i can feed the kids and pay the rent then i dont mind missing out on nice things

sorry for going on

[Soupie]

Sorry yes it is and it has been on its way for a long time - from an insider point of view we have been aware of the decline for two years and I predicted the house price drop to the month ......

Actually I don't think the media are talking it up but then I see the effects of it every day in my job and there are a lot of people who are going to be in serious trouble if it continues.

The main problem is the rising costs of food, bills, council tax, national insurance, scrapping the 10% tax, petrol all at the same time as the credit crunch - if the government doesn't look at some way of easing the burden we will be heading for a recession in my opinion ....

true cost of inflation this year? wel last year it was 8% but I suspect it would be over 10% this year and what do we all get as cost of living pay rises? most of us only 2 or 3%

[charliebubs]

Charlie, it's always tight I think in the first years of a mortgage....that's when I learned a lot of low-cost peasant style recipes! Loads of pasta dishes, rice and beans, Chinese stir fries! Hang in there...

Thanks Eileen - I'm hanging on!!! I do shop on a budget now too - I take my budget in cash and leave my cards at home and have to add up as I go around :roll: It's frustrating, but I have proved that I can do it - lots of pasta and rice as you say.......and jacket potatoes!!!

I would say its true. My Estate Agency company is closing branches one by once since January .. the last time being today in Kent :( I am lucky to still be hanging on but there are NO BUYERS so we are really struggling. My food and petrol and utilities are much higher than six months ago. I am struggling and I dont have much debt.

There is definately a crisis.

I agree Donna - I don't have much debt - but I am struggling more than ever now. I must admit that previously I would have put things on credit cards and worried about them later - but I have cut up my cards now and really trying to be sensible.

It's hard - but I don't want this thread to turn into my sob story!!!! lol :lol:

Plus - before anyone worries and/or comments - the cats come first - I'll happily eat beans on toast so that they can carry on with their nice food and luxuries!!!! They have me wrapped around their little paws!!! lol :-D :-D :-D

[Donna]

I have a credit card but it is only for emergencies.. ie my glasses I needed to buy last year and animal vet bills. I dont use it normally and only have a little bit on there to pay, which will be finished in a couple of months. Other than that the only thing I have is a mortgage.

I wish they had made it harder to borrow in the first place and then we wouldnt be where we are today.

[dandysmom]

I have a credit card but it is only for emergencies.. ie my glasses I needed to buy last year and animal vet bills. I dont use it normally and only have a little bit on there to pay, which will be finished in a couple of months. Other than that the only thing I have is a mortgage.

I wish they had made it harder to borrow in the first place and then we wouldnt be where we are today.

So true, Donna! There was a recent article about how the credit card companies are pushing cards on college campuses: students are not only graduating with a huge load of student loan debt but enormous credit card balances.... some as high as $20,000!!
Appalling, isn't it?

[angieh]

My OH is very hard line about people borrowing more than they can afford and gets worked up about it being the fault of the individual. I'm with that to a certain point but do think that banks and credit companies are also very much to blame. I remember back in the early 70's when I wanted to borrow £250 to buy my first car, my parents had to guarantee the loan! It was all so innocent in those days - I remember actually writing to the loan company when I had paid it off and thanking them for lending me the money!!!!

[dandysmom]

Different times, Angie, weren't they? People used to save up to buy things they couldn't afford; now it seems to be instant gratification! My Mom had a horror of debt; so I was raised that way...I was well into my 30s before I even had a credit card!

[Kazz]

I think thats the point isn't it everything is wanted NOW....however maybe this may be for the good in the long run as nowadays no one is egged on or "laughed" at when they say they are on a budget or can't run to that much......which is a good thing. Whereas even 9 - 12 months ago people would have been egged on to putting it on their card.

I've pretty much always shopped with cash that way I can see it going, on a card you don't have that image in your head.

[dandysmom]

Credit cards are a great convenience if you use them sensibly: never charge more than you can pay for at the end of the month, and don't carry a balance. I agree with Kazz, it doesn't feel like money; I think that may be why many people get carried away....

[Kazz]

Also find a menu so to speak for a week/fortnight/month is a good way of budgeting....and you can save loads at places like Macro...warehouse's for basics.

[meep]

I am one of the very few people I know my age (22) who don't have any debt. I paid off my student loan, have a credit card with a limit of £250 that I've never used, and haven't been into my overdraft since I was a student. I earn a reasonable wage and can live comfortably off of it, so why buy more than I can afford. I'm going to have to pay it back at some point, which means penny-pinching one way or another. Some people just don't see it that way.

I think credit works well for buying an important, large thing that would take a little bit of saving from each pay-packet but you need to buy before you have the money: such as a car, a new tv / stereo, christmas presents etc, a holiday. And if you carefully plan out how much to take out of your wages aftewards to pay it back in a few months, then no harm done. It's people who go on a shopping spree for new shoes and end up maxing their credit card I really don't understand.

This country has been far too lenient in giving out credit and overdrafts. My friend from Uni lived in France for a year (she studied French) and she had to fill in a form and have a check done before she could get a £50 overdraft limit on her debit card! It took about a month to process, and she had to push for it.

Whilst I agree the individuals are to blame for getting themselves into more debt than they can handle, I also think the companies, the media, and the advertising is to blame for creating a false sense of security about credit. This is what has created our culture of living off credit, people become immune or unknowing to the dangers or finanical implications, and trust the advertising that, well, it must be ok to do!

I also agree with angie on the food crisis. It is becoming a very real problem; I've heard a lot about shortage of rice and how whilst our rice may have gone up in price on the shelf of morrisons, there are actual shortages of it in the east where it forms the basis of their staple diet.

[dandysmom]

What an excellent post, Meep! May I congratulate you on your financial good sense?! Pity more young people aren't as disciplined and sensible about money as you are. My Mom would have loved you!

[meep]

Thanks DM! That's quite ironic, as my mum loves her credit cards and shopping sprees ;)

Money can be the root of so much unhappiness, I think people do need to pay slightly more attention to their finances rather than bury their head in the sand and they'll avoid any major stress later on when they realise they're x amount into their overdraft or credit limit!

I do like shopping, and one new thing will lead to another (new skirt, well I need new shoes to go! and of course a new top, and then makeup to match... and so it goes on) so I do have months where I spend more than I intended, but I get anxious and unhappy if I'm £100 away from my overdraft. I just seem to have this preconceived notion that being the red is BAD and makes me worry a lot! My mum used to call me a miser :lol:

But like I said, a little careful planning now saves a lot of heartache, stress, and worry later. It's a sad thing that money (often the borrowing and lending of) causes so many friends to fall out, couples to split up, and generally people unhappy.

[dandysmom]

I was a Great Depression baby; as I said earlier my Mom had a horror of debt, so I learned very early about budgeting and thrift. One of our brokerage houses, Merrill Lynch, used to have a plan called the monthly investment plan where you could make an initial contribution and then a monthly payment (not mandantory) to pool the money of investors together to buy partial shares of stocks. I opened an account at 23, and contributed to it regularly until I retired; and have a comfortable retirement now. What a pity that the plan has been discontinued; it was a great way for small investors to use the power of time and compound interest to build up savings for retirement....

[meep]

That sounds like such a good scheme, like you said, for someone who has the time and patience to invest. I have a few ISAs (tax-free) from summer-job money I had as a teenager and student, which I don't even think about really as money to spend. It's there for something big one day!

As frugal as I am, maths, numbers and money are not my strong point at all. I watched the film 'Rogue Trader' the other night and still don't entirely understand how the stock market works, and hence don't quite understand why the Great Depression came about. Well I do understand it, but not all the small in's and out's although I wish I did!

My OH explained to me how a wee while back all the gold was collected in and the Dollar stopped stating that you could trade in one dollar for its worth in Gold, then money turned into pure numbers and just floats around in cyber space now. That's what scares me - that by getting rid of gold = money value, there doesn't really seem to be a real value of anything any more. Designers produce items worth £1000s which are tat, value is now a culturally decided rather than by real wealth (does that make sense? Such as precious stones or gold). I think that's why the credit boom of the early 90s came about, as there was no longer the association of wealth to riches, but instead all welath was defined by was how much you had, ie. consumerism!

Sorry rant over :shy: I don't understand finance much but I do like to philosophise over it!