plonkee money an english-er's thoughts on personal finance

June 4, 2008

the credit crisis: am I missing something?

Filed under: banking and economics — Tags: , — plonkee @ 11:00 am

The credit crisis, what am I missing?

Apparently, there’s a credit crisis on at the moment. Banks are finding it difficult to raise money on the markets, and (as they do) they are passing on that difficulty to us. Or in other words, banks are finding it harder to borrow money, and so in turn they are making it harder for businesses and people to borrow money.

It’s supposed to be a major deal, and I know that people are talking about it a lot, but I seem to have missed the memo about the effect it should have on me.

My day job is in a growth area, so there hasn’t been any slowdown in workload, and currently we’re enjoying relative job security. So, I’ve got no more worries than usual on the employment front. Also, despite a lot of talk of recession, I haven’t actually noticed more major redundancies than normal.

Prices, are apparently going up. I don’t keep a price book (I probably should, but I’m too lazy) and so I haven’t noticed whether this is true or not. I know that the price of petrol (gas, for those that don’t speak the Queen’s English) has increased lately as the price of oil continues to rise, but as I don’t own a car, I felt the direct pain of that. In a country where you can buy a T-Shirt for less than half an hour’s work at minimum wage, I think prices would have to increase a lot for there to be real hardship for the majority of people.

I think the biggest obvious impact that the credit crisis has is in the availability and cost (in the form of interest rates) of credit. I only have two debts – a student loan, and a mortgage. The interest rate on my student loan is tied to inflation, and is paid back via the tax system, so as long as my salary continues to increase at least in line with inflation it shouldn’t cause me any reduction in net income.

My mortgage is a two year fixed rate deal (typical first time buyer mortgage) and I’ve got another year to go before the end of the fixed rate. So there’s no problem there. Of course, I will want to remortgage in a years time which could be interesting if house prices drop too much (currently I’m about 10.3% above negative equity) the latest prediction are for a 5%-10% drop so I may not be able to remortgage on good terms, or at all. In which case, I’m almost certain to see an increased mortgage payment. But, as the last year has shown, a lot can happen in the financial markets in twelve months.

In short, I’m not worred about the credit crisis, it honestly doesn’t seem to have had much effect on me. But maybe I’m missing something. Let me know about your experiences, and what you think of the credit crisis in the comments.

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