In 2007, America suffered quite a few economic setbacks. The Canadian Dollar (dubbed the “loonie”) had risen above it’s American counterpart, lenders went mad with cheap mortgages and Britney Spears went into complete meltdown.
All of these events filtered their way down to the likes of Me, a twenty four year old male in the rainy wilds of Essex, in the UK.
As a consumer, I was in the fortunate position of being able to profit from America’s weak dollar. I was able to order electronics, jewellery, clothing and pay for services at half the price of the British pound. This of course was blown out of all proportion by the British media, the business minds among us who profited from the weak dollar being chastised for taking commerce out of Britain.
I suppose I should have profited while I could. I say this because of my looming house purchase.
I have written couple of posts in the past about the status of the purchase, with me foolishly thinking that the mortgage would go through quickly. It has taken right up until today and is still being processed. It’s caused by the current crisis hitting the US and the UK which is lovingly referred to as the “Credit Crunch”. Let me give you a background:
The “Credit Crunch”, also known as a “liquidity crisis” or a “credit squeeze”, is where the banks won’t or can’t lend. Investors can’t or won’t buy debts. Suddenly it’s very difficult to borrow money. There is a lack of easy money. Consumers and businesses have less to spend. There could be serious ramifications for an economy. [source]
The collapse of such subprime mortgages in the US was the catalyst for the global credit crunch that has left banks nursing huge losses. Some industry analysts suggest repossessions in this country could hit 70,000 next year - the highest since 1991.
Citizens Advice claims the crisis has been fuelled by finance companies which have sold expensive home loans that were ‘doomed to fail’.
This has meant that mortgage applications are being declined in greater and greater numbers. In November of last year, applications were down 6000 from October, which was the lowest figure since the beginning of 2005. [source]
I am lucky that I am in the position where I haven’t been declined……yet. Any such event would leave a black mark on your credit rating, causing you to take higher and higher interest rates from lenders willing to give you the money for your house. I am at the position of certifying my secondary income now, with the accountants playing silly games it could still take a while.
Six months ago, I would not have had a problem, such is the unpredictability of the economy.
I am fending off the Estate Agents and being consoled by the mortgage broker, it’s a tad stressful!
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