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Original poster

So what does this credit crunch mean for people?

36 replies

sammysam · 30/09/2008 09:14

Dp and I are completely clueless about the economy and as we are young we have never really seen a recession (only as children), We want to know what it means for us...we understand if you have debts then you are going to suffer quite a bit, but we have no debts at all (only our mortgage), so what does it mean for us? Dps job is quite seccure (touch wood) so is it just a case of riding it out? I suppose the main issue for us is that we would like/need to move house and i have inherited some money that a year ago would have enabled us to....but now that the housing market isn't moving I can't see that happening for some time...or could we be lucky?
What I am really asking (and hoping) is if you don't have debts will you be ok-or is that very naive? Sorry for the ramble!

OP posts:

Original poster

sammysam · 30/09/2008 09:15

Whoops-was supposed to re-title as that makes no sense!

OP posts:

Tortington · 30/09/2008 09:18

i think the greatest risk is job security, one might think that their job is secure but if the backer of the backer of the bank has just lost all their money in the Market - then jobs go firther down the line.

i am lucky in that i am in an industry that provides for poor people - the more hardship the more secure i am

LadyMuck · 30/09/2008 09:31

Job security is the main issue. Inflation is another. Access to cash is another. There are fewer mortgage lenders so that will have an impact on rates in the future. And there are going to be significant tax increases in the next couple of years.

If you have no debt and live well within your means (eg you currently could afford for your costs to increase by 15-20%) then practically it will be down to job security. If your employer is the state then you may be more secure, but elsewhere you need to consider how your employer is funded and whether there is a risk that they will run out of cash.

I had just graduated before the last recession, and we were the last cohort who found jobs easily. For my peers who were on 4 year degrees there were absolutely no jobs available - at all. They either all went on to do Phds etc to wait out the market, or they went into teaching or public sector management jobs. I didn't particularly suffer in the recession, and picked up a house at the bottom of the market. For people who graduated a year later it took longer for their careers to get established and to my thinking they all ended up with grabbing jobs because they were desperate - they didn't have the opportunity to chose, and they ended up taking a lot longer to progress.

This time round it thing that the trends seem to be similar so far. I'm not seeing too many 35+ being made redundant, but firms aren't recruiting as many graduates. Not to say that middle and senior management aren't at risk - in some respects they always are unless they continue to prove their worth. But often companies cut back on training up the next generation and work with who they have.

overthemill · 30/09/2008 09:35

your pension will not be worth as much but you still need to be prepared so cut your outgoings and save more

DaisySteiner · 30/09/2008 09:41

If you want to upgrade your house to a bigger one, then waiting till the market reaches the bottom is a good time to do it because although you won't get as much for yours, it will also mean it costs much less to buy a more expensive one.

I'm not sure yet what it will mean for us - dh's job is always a bit rocky, because of the industry he's in and I don't really think I recession will make that much difference to its stability. We're on a lifetime tracker mortgage, so we may well see our payments go down in the next few months. However, we had planned to extend our house next year and now there's a question over whether we will be able to borrow the extra to do this or even whether it will be worthwhile extending or better to move. If we're pushed into negative equity if house prices fall very dramatically then this wouldn't be an option either though!

BlingLovin · 30/09/2008 09:42

If you've got a decent deposit, and are willing to trade getting a lower price for your current house in exchange for paying a lower price for your new house, you can still move house and in fact could land up getting more for your money than before. But, as everyone else has said, you need to think carefully about job security and I'd be hesitant to take on a new mortgage unless it was well within your means to pay, even if rates go up again, or one of you lost your job.

For us personally, it's meant we're making a better effort to kill some of DPs debts from before he met me by consolidating those debts into one, much lower interest rate one and then being absolutely tyrannical about spending on a monthly basis so that we can build up a rainy day fund. We've cut both our personal and joint spending significantly - food and entertainment costs alone are down by about 50%.

expatinscotland · 30/09/2008 09:42

For some people, it doesn't mean a whole hell of a lot. Increased bills for services, but otherwise, pretty much business as usual.

schwotz · 30/09/2008 10:02

It's not all hype. Fuel cost and bills are going up. People will cut back or use more credit and get into more debt.

The only people I know who are indifferent to what is happening are civil servants.

sammysam - If you move and go to a bigger house your running cost bills will be much more than you expect. If you don't have to move I would stay put.

fakeblonde · 30/09/2008 11:35

How long do you think it will all last ?

noddyholder · 30/09/2008 11:43

I think it means cutting back and seeing some of what we have taken for granted for yrs as luxury.As long as you have a sensible mortgage in relation to salary and you live within your means you just ride it out and wait for things to improve.I hope.

mikehunt1 · 30/09/2008 11:44

Agree that it's job security which is the big worry for most people.

I'm half expecting my firm to go under within the next year & am job hunting but there's nothing on the horizon.

If dh loses his job we're up shit creek.

DaisySteiner · 30/09/2008 11:47

I don't think anybody knows how long it will last, but what's happening in the US at the moment with a potential bailout of the banks may have a big impact. If there's no bailout and the banks weren't bluffing about how bad things are for them, then we could be looking at a 1930s style depression for a number of years. Assuming there is some sort of rescue (which I think is extremely likely) then I imagine there will be a recession, perhaps on the scale of the 90s or possibly a bit less severe. I'm not an expert by any means though!

expatkat · 30/09/2008 11:48

This Q&A on the BBC website is informative.

I think it's naive to think banking crisis etc won't have far-reaching effects.

The failure of the bail-out plan in the US is worrying. People think it won't affect them, but it will.

overthemill · 30/09/2008 11:53

it will affect us all in big and small ways. we've all noticed food/energy prices rising. some of us will face neg equity. some will get made redundant/have to have no pay rise and end up on less money in real terms.

we all need to cut back and wait i think.

mrsalansugar · 30/09/2008 11:54

We have no debts other than the mortgage but dh works in the building trade and his firm has already been badly hit which means we're having to sell our house. That is despite cutting back on everything as much as we can - we have nothing ocming in.

DaisySteiner · 30/09/2008 11:56

As I understand it though, the food and energy price rises we've seen are only indirectly related to the credit crunch. I believe the BoE is forecasting inflation to slow down dramatically as we enter recession and there are even some concerns about deflation.

Grammaticus · 30/09/2008 12:05

Can't imagine Alan Sugar doing anything as useful as getting his hands dirty!

Original poster

sammysam · 30/09/2008 12:52

Thank you so much-lots to think about here.
DP has ALWAYS been very careful and good with money (me less so ) but it is he who thinks that we won't have any problems whereas i'm worrying about what it could mean for us...i'm sure there are VERY few people who'll come out the other side unscathed...but then as I said i have no experience and really no idea.
I'm so naive-could someone explain the differences between the 30's depression and the 90's recession and what happened?
I heard this morning that food prices are expected to start coming down soon?

Re moving-i've really resigned myself to not being able to move for some while especially as the expenses of running a bigger house might stetch us-i really don't think its worth risking it-that does make me quite sad though as we really are very 'cosy' in this house (this is how i'll have to think about it from now on as it sounds better!)

DP feels secure in his job as it is a very small company-he is the only non family employee in management-they said to him this week that they have enough money saved to not make any money for the next 5 years and still pay everyone......my worry is that they might change their minds about that after a while. And the fact that everyone else is family would mean that dp would be first to go. They have told him he is totally indispensable but i'm sure if times became tough enough......
So i'm not worrying unduely am i?

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DaisySteiner · 30/09/2008 13:04

I think it's completely understandable to feel anxious about this, but if you're already doing as much as you can then there's no point worrying because you can't change things worldwide! Your dp's job does sound much more secure than many.

A depression is basically when a country's national income decreases massively, usually for a long period of time. A recession is when the country's income falls by two consecutive quarters (or more) and is less severe and the economy should recover more quickly.

TheDuchessOfNork · 30/09/2008 13:05

What about bankrupt banks calling in debts for immediate payment? ie. credit cards. I'm not sure I even had a credit card in 1987. Only have monthly running costs on mine now so I'm not worried for me but I know friends who have mahoosive credit card debts.

MrsBates · 30/09/2008 13:05

I am friends with Alan Sugar's wife's hairdresser. Strangely I think his job is safe as far as that client is concerned.

I have a sort of optimism despite currently feeling as though I'm flying on a wing and a prayer every time I approach a till. The crisis will ease at some point...don't know where, don't know when...and maybe people will emerge being more considered and less throwaway about food, possessions and resources. Have been immersing myself in WW2 recently though so am perhaps planning to live out a recreation of rationing, leftover rissoles, vegetable plots and darned socks. But feel there is a lesson that ties in with considering the climate, food production etc And we should start appreciating what we have instead of what we want. A whole new world la la la.

expatinscotland · 30/09/2008 13:07

'What about bankrupt banks calling in debts for immediate payment?'

Well, you can't get blood out of a stone.

They can call it in, but if a body doesn't have it to pay . . .

Original poster

sammysam · 30/09/2008 14:32

Thanks for the explanation Daisy!

Good and worrying point about credit cards-i have many friends and my mum who wouldn't be able to pay the bills if they were demanded-would they then be made bankrupt? Or what would happen?

MrsBates-i've been thinking along the same lines really-it would be a very good thing if that was the outcome-infact it really should almost be inforced imo! Its how i'm looking at our situation at the mo-we really are very lucky and I really am starting to sit back and appreciate

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overthemill · 30/09/2008 15:50

although the problems with banks go back to the sub prime lending stupidity there is a link surely with what all of us have experienced - higher bills and rising costs for everything? even dd's brownies has gone up!!my rail fare has incraesed massively

we need to cut back for economic and environmental reasons and live within our and the planet's means.

its a real 'there but for the grace of god' time for me - in 1990 i went into negative equity and it took me 6 years of taking on two jobs (so 37 hours lus then working weekends/evenings at other little jobs) to pay it off so i could move to get a promotion.

still totally fear that happening again. is used to have £2.50 a week after all household bills for food/petrol etc. real agony. never again

mumfor1standmaybe2ndtime · 30/09/2008 15:56

All it means for us is more outgoings, like electric, gas, petrol, food etc.
We don't have a mortgage and I am quite glad about that at the moment!

I really think a lot of it is overrated - if there was such a problem with people getting by then why when I visited the supermarket the other day did most of the shelves seem to be empty? Thought maybe people were stocking up - like the 'Millenium bug' trend we had? lol.

Maybe I would feel differently if I had a whopping Mortgage over my head?

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