Top Tips To Survive The Credit Crunch

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Author: Ian Davis

Article source: http://www.articledeshboard.com/. Used with author's permission.

As the global investment bank Bear Stearns goes the way of Northern Rock there seems to be a little hope for the other overexposed financial institutions. The fact that they are largely victims of their own ineptitude and greed (and a woeful regulatory body) brings me no sense of relief whatsoever.

I fear that the chronic uncertainty of the financial markets is going to infect us all and, as consumer spending takes the inevitable nose dive, our economy will follow suit. We are all going to feel the squeeze.

Of course the bankers own cavalier attitude and immeasurable greed caused all this in the first place will be very well placed to weather this storm due to vast wealth they have accrued at our expense. So for the rest of us poor gullible souls there are really only two questions. How bad is it going to get and what can we do to protect ourselves and our families?

Despite two interest rate cuts from the Bank of England since December the cost of borrowing is still on the up. With the diminishing availability of unsecured loans and many banks and building societies hesitant to lend more than 90% of property value, the first time buyer without deposit is no longer viable in the market. On top of this, recent figures show a 0.5% decrease in property value last month with sharper, more significant falls predicted.

For those coming up for mortgage renewal the average increase on a £250K mortgage (over and above projected increase) is going to be equivalent to £100 per month currently. This figure is also set to rise steeply in the coming months. However if you are in this situation it is better to shop around now rather than submit to the lenders Standard Variable Rate (SVR) in the future. Check out the comparison sites now! There are still a decreasing number of deals that are sure to compare favourably to simply biting the bullet on your lenders SVR.

As with the mortgage lenders the credit card and personal loan companies are also far less free with their money. Unless your credit rating is spotless you may find credit very difficult to find, certainly in the short term.

There is a danger that the downward spiral of the housing market could drive consumer spending far below government prediction. This is being compounded by inflationary pressures coming from rising fuel and oil prices coupled with increased global demand for all commodities, especially in the emerging Asian markets. This is bound to impact upon employment, especially within the financial sector and job losses are already predicted in London and the South East.

However, the fact that Britain's labour market is just about as unrestricted as you'll find west of Bangkok, could actually help UK employers to survive in more turbulent economic waters. Nonetheless we are all going to have to accept a reduced standard of living.

Pensions may be hit hard and recent the instability in markets which saw the FTSE drop by 4 points yesterday (17/03/08) has seen billions wiped of pension funds. However the saving grace may well be the staggering increase of commodity prices. This has seen corporate and bond investors thrive and most near retirement will have been moved away form equities. If you have longer to wait for your fund to mature, don't panic. Indeed falling markets may reveal some bargain stocks.

Indeed those with savings could be in for a boom time. The dwindling capital markets have stimulated the banks desperation for cash prompting them to offer ever improving saving rates. So now is definitely the time to look into the possibility of moving your savings. Chances are that if you haven't done so already you could well get a better rate elsewhere. In fact you may be wise to build your savings now, if you can, as they may be required should your financial security be jeopardised.

So in conclusion now is not the time for most of us to consider buying a house and all other borrowing should be kept to a minimum. If you must borrow then shop around now for the best possible rates. As ever you should protect yourself and your family with life insurance and preferably an income protection plan, but this is perhaps even more important during uncertain times.

However, as stated above, it's not all doom and gloom. The financial climate for savers is good, now
is a good time to seek out the wise investment but be sure to diversify your portfolio to spread your risks.

Ian is co-founder of niche-marketing-business.com and is author of the most comprehensive guide to Profitable Niche Marketing Business. ---learn how to create genuine financial freedom.---