Hi,

Is the so called “credit crunch” having a real affect on you - or is it a media myth?

Have your say here.

Not yet, maybe the cheque is in the post!

it will hit us but indirectly and I do think there is far too much media hysteria being shouted about this. I hear annecdotal evidence of people not getting their mortgage renewed and some being turned down flat for a first time buy. However let's face it the banks are out to make money still so if you are a good credit risk you will still be able to borrow.

I agree with most of what  you say there, too many people moaning about not being able to get a mortgage, it is true to say the banks have been reckless with their lending, or some banks have, now the risks are too great, and this risk is reflected in the criteria and rates, as they should be, but the crux of it is banks are commercial entities and are all about profit, they are not charities, and can not shoulder all the blame.

 Just as an aside I watched that programme the tonight show last night, did anyone else see it ? did you notice how all the people that were interviewed that bought property, new build property, all lived down south but purchased up north, none had done their due dilligence, none had even visited the properties, it was such a biased one sided opnion of a show, that showed just how greedy people are, these were obviously people that saw short term pound signs and no one mentioned the long term gain, it is this exact reason for the troubles they are in now, GREED. The people that were on that show, and I am sure not one of them put up any deposit in those properties,  succumbed to their desire to make a quick buck, probably no one was told it is an investment and this can go up and down, come on ITV where is the other side of the story, it is this greed that has caused the credit crunch, real investors do not gear up their portfolios to 85%loan to value they gear up to less just in case of fluctuating markets, and they always have a slush fund just in case, and a real investor would  do some research, check out the local market, check out rents, after all this is business, not like these armchair investors, ask your selves this where did that single mother get 15% deposit to purchase 4 properties all at once? that is the real crime, that people blame others when they only have themselves to blame. and I do not believe flats are overvalued by 50% what a load of rubbish it costs at least 70-75% of the value to build.

The credit crunch in my opinion has been caused by greedy banks and greedy people exactly like the ones on that show, and while i feel sympathy for the fact that they have made a bad investment, they have only themselves to blame, and the rest of us will suffer for it

I have recenty pulled out of buying a property due to the state of the economy.  I was in the market when the last crisis happened last time and it was not good, house prices went down significantly, and a lot of people went into negative equity.  People say the economy is very different now, but I think they are wrong.  They say we have low unemployment, however, with more and more companies feeling the pinch there will be more redundancies and therefore less jobs, it is a slippery slope and I think this could be just the beginning of the problem.  We have pulled out of buying as we feel we could lose 20-30% over the next 2 years.  We have decided to rent and wait to see what happens.

 

Yes, I saw that programme and I was shouting at the TV, "Why on earth would you buy a property you haven't even seen?" 

I live down south and have seen loads of advertising by the companies such as that one on that programme who invite you to seminars (free) and say they will make you a property millionnaire.  Don't people think first?  Why would these companies hire the hotels to put on free seminars if there wasn't something in it for them?  You are right that the investors' greedy heads get the better of them, they take everything !the company says at face value (bear in mind though that the company could have been overvaluing the properties - I bet the valuers are not truly "independent" if you dig deeper).  The companies don't care if it goes pear-shaped for the investors as they make their money from their "fees" for setting up the deal.

But I truly do not understand people who put large amounts of money up for these schemes without doing their homework!  Pure stupidity!

No, it is not a myth.  I wish news would be more focussed and give us more objective facts.  Emotional issues are highlighted, but other more boring issues are not given any attention.  I don't feel I really know what England's "wealth" is based on any more.  I feel it might be on sand.... 

Somebody said wealth comes from making ( manufacturing industry), mining ( mostly destroyed in the 80's ), and mending ( yes we do still mend some things, but a lot of goods are bought so cheaply they are thrown away).  To me the economy doesn't make sense - how can people expect to borrow huge amounts at low rates?    The problem is we alow too much "market forces" and compete with each other to stretch ourselves to the limit for a roof over our heads .... and for all the other shiny new goods we fancy - and the sellers can charge what they like because too many buyers are too willing to pay too much - because they can borrow it.

I think this credit crunch is basically going back to a more sensible lending strategy that is better in the long run, but it is damaging because it happened too quickly.  A controlled slow down would have been best.  If there was more decent rented housing available with proper rights for longterm tenants I do not think the housing market would have got so out of control in the first place.

i actually agree with the credit crunch. i felt the credit crucnh about 4 years ago when i couldn't get anymore credit and had borrowed up to my max. Because of this i now have stopped spoiling myself with money i dont have and for the past 4 years lived on minimal amounts and payed off big chunks each month. i am no nearly clear thank god, but i really feel for people who are in the position i was in 4 years ago. The best thing the gov/ banks can do is stop lending money to people who cant afford it. the fact that it is so easily available makes people turn to it as an easy option rather than working harder to save the money.

 

I am glad you had the foresight and fortitude to sort it out Rakey, alot of people would have chucked the towel in and took the eay option of sequestration or insolvency.

You say you wish the banks would stop lending to people who cant afford it. However that abdicates the responsibility of the individual to NOT borrow the money in the first place. You cant lay all the blame with the banks. I know people who have borrowed well above what they could afford to repay by lying through their teeth to the bank because they "thought it would be alright and something would come along". Wrong it does not.

Let us face it these people have buried their head in the sand, it is their fault they are in a mess, not the bank. it is time they stood up and accepted personal responsibility for it - see the thread on the "cult of no responsibility".

I know quite a few people who believe in saving up for everything they get and wouldn't dream of having a credit card or taking out loans or even a mortgage.  I remember a time when my mum was refused HP unless it was with Dad's permission.  Nowadays banks are too ready to lend and the only winners really are the banks.  Perhaps people SHOULD have more willpower but if you're strapped for cash and someone's willing to offer you a loan most people would take it without a second thought. 

 

Hi!

I work as a business asset finance broker, and I have to admit that the crunch is certainly crunching harder than ever.

On a personal note, I fell into difficulties two years ago when a client of mine went bust owing hundreds of thousands of pounds (it was, again, the property market). Rather than bankrupt my own business or go into a CVA I took the decision to bail the business out using my own capital. I can look in the mirror with a clear conscience, but by God it's been a  difficult couple of years.

Starting afesh with absolutley nothing left I went into the business finance game, focussing on selling new vehicles as well as asset finance. The first thing I've noticed is that making money this time 'round has been much harder than it was five years ago. I've worked pretty much seven days a week, and up to eighteen hours a day for two years to regain my bank balance. Slowly, my own financial situation is getting easier, but every day now I'm coming into contact with more and more businesses struggling to prosper.

Other than the fact that many business I know are fighting hard to keep ahead of the game, two of my main concerns are

• Much of the business asset finance agreements now being written are being done so with directors guarantees, or guarantees on company property (as opposed to being reliant on the resale value of the asset being financed). If things do "go pop" then there are going to be a hell of a lot of homeless people roaming the streets! (Another problem for Mr. Brown to consider)
• More and more finance companies are "pushing" their services to re-finance wholly owned assets to ease cash flow. If a company want to raise finance for an expansion project, or to further their business in some way then re-financing is a good option. The idea of re-financing is NOT to raise cash to put in the bank to ease cash flow in the short term - what happens when this capital injection runs out? Where will the next "lot" of money come from?

Many businesses that I deal with are relatively new, or have directors that had no experience of the last time the country spiralled into financial difficulties (speaking mostly about SME's). I think that there should be more help and advice available to make sure that businesses can weather this storm.

Ok. Rant over... nearly.

 I also don't think that media "scare-mongering" does us any good what-so-ever. If people are told that there is no money, general suggestability and paranoia will, and does, have an adverse effect on public spending. Yes, the country is experiencing a financial shift, but surely the media have a  social and economic responsibility to report the facts without the need for injecting the sensationalism that leads to mass hysteria, which in this instance results in reduced public spending?

Ok... that's all for now folks!

 Justin

PS. Can I also use this slot to complain about fuel prices?

 

 

rosiet2008:

.  Nowadays banks are too ready to lend and the only winners really are the banks.  Perhaps people SHOULD have more willpower but if you're strapped for cash and someone's willing to offer you a loan most people would take it without a second thought. 

 

This is the whole point though Rosie, no-one has any willpower these days and no-one takes responsibility for their mistakes anymore (or very few do). I am not defending the Banks, far from it, their day of reckoning is already here. However it is individual choice to sign that paper and accept the terms of the loan, if you then cant pay it then that is your own fault.

My parents and grand-parents had a mortgage but that was it, they would not dream of getting it on the "never-never" because they despised being beholding to anyone. They stood on their own and got on with it. If they wanted something but could not afford it then they waited and saved up until they could afford it.

We will never see those days again unfortunately.

 

 

 

Yes but people had willpower in the old days because they had no option but to have willpower (i.e. if they didn't have the cash, the possibility of a loan, or any other form of credit then it's hardly a case of willpower to say no to something they're not allowed?!   Yes people saved but that was only because they had no option.  As for the banks getting their comeuppance how so?  If they get into difficulties they become nationalised and the taxpayer bails them out (despite being given a pittance for savings yet charged over the odds for loans).  Banks should take some responsibility to loan only to those who can pay back what they borrow.  At one time they would only give mortgages (and what is a mortgage if not a loan?) that were 2 1/2 times someone's salary - now they're letting people take out 50 year mortgages.  Ludicrous!! 

Of course they had the option to borrow, lending money is hardly a new innovation. In fact it is the 2nd oldest profession known to mankind. It was a different generation and although it is easier to borrow now that does not mean you could not previously. They just chose not to back then, there was a stigma attached to being in debt which has completely disappeared.

The nationalisation of Northern Rock was a one off and the government cant afford to do that again. yes there is a responsibility for the lenders to lend sensibly but equally there is (or should be) an onus on the borrower to not take money they cannot afford to payback. The problem is the attitude now seems to be "well it was their fault for lending me the money, so I am not paying it back" This is indefensable and I am sick of people making excuses and blaming others for their ills. I agree with your point on the mortgages though and it is ridiculous the amount borrowed against salaries and I have even heard of 125% mortgages being approved but again there is a responsibility on both sides and if you have taken on one of these mortgages then hell mend you.

If you borrow it then you pay it back, simple as that.

Yes there was more of a stigma which may have discouraged those who could borrow from doing so but there were restrictions on borrowing money back then.  Women it seems were not allowed to borrow - as mentioned earlier Mum needed Dad's permission to do so.  So it wasn't just that people chose not to borrow - there were restrictions just as borrowing for a mortgage was restricted to 2 1/2 times someone's salary.  I still think those who loan should bear the major responsibility - after all it is they who lose out if the money isn't paid back although I'm not sure how  people can take the I am not paying it back attitude - if money is borrowed it must be paid back else they get a jail term or a  declare themselves bankrupt (which is the option an increasing number of people are opting for now - another option which at one time was frowned upon).  

rosiet2008:

  I still think those who loan should bear the major responsibility - after all it is they who lose out if the money isn't paid back although I'm not sure how  people can take the I am not paying it back attitude - if money is borrowed it must be paid back else they get a jail term or a  declare themselves bankrupt (which is the option an increasing number of people are opting for now - another option which at one time was frowned upon).  

Why they should they bear the majority of responsibility? There should be equality of responsibility on this.

BTW - people do not get sent to jail for being in debt, in Victorian time maybe but not now. You will only get jailed if you are fined by a court and do not pay it back.

Did you realise that Bankruptcy only lasts 1 year then you are clear - Hardly dire consequences of being financially idiotic is it?