10 November 2008

Stormy Waters Ahead

The Credit Crunch is well upon us and it appears that it can not get much worse. However, I’m afraid, I’m the bearer of bad news. It’s going to get a lot worse, before it get’s any better. More than one in four employers are planning to make new or further redundancies in the next year, reveals the latest research from the Chartered Institute for Personnel and Development.
The number of people who spend more than they earn each month has risen to nearly 5.3 million according to Legal and General. And recent Debt facts and figures from creditaction state:
Today in the UK:
  • 4,000 fixed rate mortgages will come to an end today.
  • 121 properties will be repossessed today
  • 275 people today will be declared insolvent or bankrupt. KPMG estimate this will increase to 301 people a day by the end of 2008 which is equivalent to 1 person being declared insolvent or bankrupt every 4.8 mins.
  • Consumers will borrow an additional £207m today
  • Consumers will pay £263m in interest today
  • The average household debt will increase by over £8.50 today
  • Unemployment increased by 1,802 people every day during 3 months to end August 2008.
  • 429 mortgage possession claims will be issued and 315 mortgage possession orders will be made today
  • 2,370 Consumer County Court Judgements (CCJs) issued
  • 27.4m plastic card transactions will be made today with a total value of £1.56bn.
  • Approximately 18,000 credit card applications are being rejected every day.
  • Citizen Advice Bureaus dealt with 4,760 debt problems every day during the last 12 months
  • 1/3rd of all groceries we buy today will end up in the dustbin!

The official bank rate was reduced by 0.5% to 4.5% on 8th October 2008. The last time it was reduced to this level was 4th August 2005. However, some of the banking institutions have decided not to pass on this cut to the borrower just yet. And where is that Bank of England investment of £50bn?
The mortgage market is in turmoil. Many people are looking to remortgage to a better rate or wanting to purchase a property. But, due to the current climates, lenders have no appetite to lend and thus, few products available.
Or, the products that are available are not as ‘accommodating’ as they were two or three years ago. The bank of Mum and Dad has also become somewhat harder to obtain as savings dry up, redundancies occur and living costs soar.
So what does the future bring? Well, sadly, it‘s very negative. No one has a crystal ball and can say when this global recession will finish. Some say it works in cycles and normally around two years from start to finish. The mortgage world has been in this since August 07, so if the pundits are right, we’ll be offering market leading products next summer, with the consumer market returning back to some normality in spring 2010.
The next 12 months will be testing and trying in every ones lives. If there’s one bit of advice I can give you now, it’s make sure your expenditure is less than your income. Review all your standing orders, direct debits and unnecessary lavish spending.
Don’t tackle this on your own. There’s no better time to be using a financial adviser or specialist mortgage broker, such as AToM, to assist you in preparing for the stormy waters ahead.
Finally, buckle up! This is going to be a journey you will not forget in a hurry!