Hi Billbo,
The Credit Crunch is, as you described, is a problem for Banks and simillar businesses that borrow money from other Banks to then lend on into the retail arena. The Crunch, caused by Banks being unwilling to lend to each other is likely to be short lived as Central Banks have already cut their intervention rates. As money gets cheaper, and the Banks find out who holds the bad US Home loans, they will start to lend to each other again.
Unfortunately there is more to concern us - a credit contraction. The Banks are currently reassessing their attitude to risk and will, in all likelyhood, be far more carefull who they lend money too and the security they require. For businesses and consumers with poor credit records further credit will become increasingly harder to find.
The importtance of ensuring we avoid unnecessary debt and ensure that we know how and when we will repay debt before we borrow are going to be very important to all of us.
BRITAIN’S consumers face a real challenge in 2008. If their income isn’t already spoken for it’s certainly under threat. Mortgages will be harder to find and vastly more expensive for many. Credit, Loans and other interest costs are unlikely to fall even if the Bank of England wants them to. The largest investment most will ever make, our houses, are falling in value. The economy is still hoped to grow by about 1-2%, but the population will also grow, that means many must settle for less. The cost of Fuel, Energy, Food, Clothes and almost everything else we import is rising and likely to rise further. As and when the pound falls from its current value the impact of these costs will pile on. So can we all get pay rises to pay for all this? Ask yourself. For certain if you work for the Government, the NHS, in education, the services you can see how the government is already sending signals by fighting with the police over £200. The finance industry for the first time in twenty years is slashing bonuses. So as the biggest single element in the UK economy is retail consumer spending we are forecasting scary New Year for many. For those carrying credit card debts, it’s now your chance to get ahead of the crowd, stop overspending, start paying down the debt and set the trend many others will have to follow. For those that have got comfortable being in debt and kind of manage it on “it’s ok so far” basis it is time to realise there is going to be some sort of personal crash. If it helps, think of it as if you were driving along a motorway and you know there is going to be a pileup ahead, slowing down means less damage, stopping and having a break is safer, and best of all getting off the damn road and going another way will get you to where you want to be. In the newly more competitive world carrying a large pile of debt is a handicap few of us are going to find easy. The thought of paying down your credit card debt may feel hard but it’s far easier then crashing and burning, you only have to ask the tens of thousands that lost their homes last year. Our experts also tell us that once you start to get a grip and pay down the balances it brings its own satisfaction from getting real with your life.