The credit crunch: An 18 month munch
Sep 22nd, 2008 by ctoop
News Week: 22nd September 2008
The credit crunch has really hit hard these past few weeks; £100 billion has been wiped off from the stock markets and predictions into the economic future seem bleak. Estimations form Britain’s largest mortgage provider, HBOS, are that the credit crunch could last another 18 months.
Individuals currently aren’t too affected by the financial trouble, however, with this new prediction, it won’t be too much longer until it starts to affect our everyday lives. Currently house prices have fallen by 13% and new car sales are down by 19%. These figures show that people are watching what they spend money on, cutting out luxuries such as new cars.
The Council of Mortgage Lenders have decided not to try to predict house price falls this year as they believe the market is futile.
They have commented on their May prediction, by saying that they ‘underestimated the extent to which property values are set to adjust’.
The Council now believes that the current climate is even more uncertain than it was in May with more aspects to consider such as the affect the widespread turmoil in the financial markets is having on people’s personal finances and what people spend their money on.
Although the Council have decided not to predict the housing market, other economists are less hesitant; Capital Economics predict that the housing market will not recover fully until 2010.
This is bad news for anyone trying to sell a house in the current climate, yet good news for those buying.
People are able to buy property at low prices and could potentially cash in when the market begins to rise again.
It has been proposed that £200 billion of taxes could be used to prevent the financial collapse of several British banks. The banks that would benefit are; The Royal Bank of Scotland, HSBC and Barclays, who will all be waiting on news that could save their future.
Many tax payers believe that this large sum of money that is being used to bail out the banks could have actually been used by the NHS or even the prison service or schooling system to benefit the nation directly.
Alistair Darling, Chancellor of the Exchequer, has been warning tax payers that the situation will take time to improve and that they may have to bear the brunt of the nation’s borrowing.
Experts have said that if tax increased 5p, it would pay for the borrowing of £100billon a year. This will mean that the tax payer will again be paying for the banks’ mistakes and will leave the tax payers even more out of pocket in the poor financial climate.
On Thursday, Ireland faced recession. It is believed that this was in part due to the declining property market and the global credit crunch. Not only this, but poor exchange rates and little demand from their usual trading sources have helped rack up a huge tax loss this year; which has also caused a budget deficit of around £4.5 billion.
It is feared that this could also happen in the UK and other countries around the globe. This is bad news, as a recession is a slowdown in economic activity marked by less consumer spending and often also by higher unemployment
Bradford and Bingley has been the latest bank in severe trouble with its future hanging in the balance. The company which has lost 95% of its value in the last year is thought to be merging with publicly owned, Northern Rock, to create a ‘superbank’. Decisions on this merger are currently being made.
By Charlotte Toop
