We have all heard the term of the credit crunch on all the news and media recently, but what really means and how it affects you? In basic terms, the credit crunch is where there is a sudden decrease in the availability of credit and loans and / or a hardening of the conditions and criteria of loan required to lend money from banks and financial institutions.
To begin with, it will be very difficult so you can ask for a loan for any reason. Get a mortgage will be difficult, if not impossible as mortgage products have virtually disappeared from the market, with the loan with the left very strict criteria. The good news is that people with existing Tracker mortgages will benefit from central banks reduce lending base rates to try to increase lending which means less monthly mortgage payments.
The credit crunch affects both employers and employees. If you’re an employer it is likely that you notice a decline in sales caused by customers trying to save money or pay off debts instead of spending it. This will be combined with the pressure on the profit margins of supplier costs increased and increased discounts that will have to attract customers. Try to get or to increase a bare also will be very difficult and if you’re lucky enough to get a willing to pay exorbitant interest rates that banks try to recover losses.
As an employee, be prepared to wave goodbye to bonuses, salary increases and security in employment for a time. Let us hope that it will not be one of the many unfortunate people who lose their jobs due to bankruptcy or redundancy since the companies try to put in the best position to survive the credit crisis. Sometimes even were asked to accept a pay cut or reduction of hours to keep his job.
It will affect their personal assets in two ways. The first is the value of your property is likely to decrease as people left out of the acquisition of housing by lack of funds mortgages, or confidence that causes prices to fall. If you have a high loan-to-value may be in danger of falling into negative equity, which can be very difficult if it is time to remortgage or sell.
The second that will be affected is through their savings. Interest rates paid on savings soon will become non-existent as the base rate falls and banks try to return as little as possible to help their earnings. If it is based on interest from their savings to live on it might be a good time to look for alternatives, also your money may be at risk if their money is held in a bank in difficulties or the construction of the society.
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