Welcome to TheCreditCruncher.com

The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

25 Nov 2016

The EU is not for turning

Incoming president of the EU Joseph Muscat (Malta) has declared that the EU will not be prepared to allow the UK to be part of the single market when it leaves. 

This will put more pressure on the supporters of Brexit who are implying that single market access is achievable after leaving the EU.
Muscat takes the position that there are a great deal of details to be negotiated, not least of which will be the 'bill' the UK will have to pay - this is something that I was not previously aware of, but looking into it has been a bit of an 'eye-opener'.
There are talks of a £350m-a-week 'divorce' settlement to cover UK obligations, which is exactly the amount that the BREXIT campaign said could be channeled from the EU into the NHS. On the other hand, it is just for the 12 months after we cut ties, but I don't recall ANYONE mentioning this is any debate?
The more we learn about the cost of leaving the EU, the more I wonder whether our government (all sides) has seriously mis-informed us regarding BREXIT, and then I am left wondering why they would do that??
I am never one to be impressed by conspiracy theories, but I am starting to seriously doubt the real drivers behind the so-called 'Remain' campaign.

So how will this affect us?

Well, we are still so much in the dark, and there are so many unknowns that we can't be definite. One thing I am becoming more certain of is that the negotiations are almost bound to fail, and we will find ourselves outside the EU on EU terms, and not our own terms. That is certainly the message we are hearing from the incoming president. Muscat will be president from January for 6 months, so will be in charge when Theresa May plans to trigger article 50 in March

10 Nov 2016

and to cap it all.....Trump wins..

As if there was not enough turmoil in the world...He's only gone and done it, the Don has taken the Whitehouse, the most powerful seat (arguably) in the world.

As might be expected, there has been mixed reactions to this, but the fact stands that he has played a clever game, and won. I am one of those who believes that we may see a different Trump now that the electioneering is over - a more statesman like figure.

But of course, if I am writing about this here, the question has to be 'How will this impact on the UK economy?'. First off, in response to Theresa May, President-elect Trump has already spoken about the 'special relationship' and of course a UK out of Europe could be the type of economy that Trump will favour when he begins to look outwards. He has firmly stated that initially the US will be looking to trade internally, and cut all agreements with other nations. Of course it remains to be seen how much of what he has said can actually be achieved.

There are real parallels with the BREXIT vote, the feeling of rebellion, the populace disengaging from the establishment.Time will tell where all this will lead us. If anyone had told us four or five years ago that all these things would come to pass, we would have not believed it.

6 Nov 2016

Back-lash against Judges

It is fairly typical of the tabloid press in the UK, to deliberately misunderstand news and attempt to mislead the public citing 'fury' where none is justified. 

A campaign devoid of logical argument has been launched by the Daily Mail attacking the High Court judges who ruled that Theresa May must consult Parliament before triggering article 50.
The Mail has gone into great detail about the personal backgrounds of the three judges as if their background and experiences have any bearing over a judicial decision. Their article goes as far as to highlight that one of the judges is 'openly gay' as if this were pertinent to the story.

What the Daily Mail must know but fails to mention, is that the courts can only uphold and apply the law as passed down by Parliament itself. Our legislation is formed in parliament by the elected representatives that form our democratic system. However 'democratic' a referendum appears to be, this does not and cannot outweigh the democracy of the Houses of Parliament. The Daily Mail surely knows this, but because it suits their cause to appear 'outraged' at the decision of the courts, it seems to conveniently forget.

Furthermore, the failure of the PM to win the right to single-handedly negotiate BREXIT is no bad thing whether you support the motion or not. The fact remains that Theresa May has not supported BREXIT otherwise there may be an argument to be made. It is not the case that someone who wants to exit the EU is being restricted - this is someone who wanted to REMAIN. In fact. this is the dilemma in a nutshell, there is so little support in Parliament for BREXIT, that democracy itself is called into question and is found wanting.

A democratic system must openly, transparently argue and vote on all considered facts. Our referendum campaigns showed poor judgement of both sides when it came to discussing the relative merits of 'remain' or 'leave'. Outrageous claims, one might say 'lies' were told (by both sides) and allowed to be left on the record as if they had merit. It remains to be seen whether the High Court judgement will be upheld, but the chance to have a proper debate should surely be welcomed.

3 Nov 2016

Court Ruling on BREXIT

Today, the High Court has ruled that the UK will not be able to trigger article 50 [needed to exit the EU] without debating it in Parliament.

It was Theresa May who has suggested she could trigger article 50 without the agreement of Parliament that has bought this legal challenge about. It is no real surprise that the court has ruled in this way, but this is a significant development on the road to leaving the EU.

Having to debate in Parliament, [with scant BREXIT support] could mean that a 'hard exit' is out of the question, as it is difficult to see the UK Parliament supporting anything less than the softest of exits. In fact it may well mean that the UK exit is almost indefinitely postponed such is the distance between what Parliament wants and what the referendum has asked for. It is hard to envisage the type of agreement that could appease enough MP's to get an agreement.

The next issue will be that once article 50 is triggered, the PM has to take a conditional 'soft' exit idea to Brussels and get the EU to agree it. An educated guess says this will not happen, so presumably there will need to be further debates and discussions back in Parliament. The danger here is that ironically we may still end up with a 'hard' exit as a default position once article 50 is triggered and no agreement can be reached.

The Government (a bit bizarrely in my opinion) will appeal against todays ruling, so speculation is a little premature at this stage. However, having originally thought 'surely this means a soft exit is the only option', having thought it through, I believe this could actually end with time being called on article 50 and a hard exit being forced by the EU.

30 Oct 2016

Canada's Trade Agreement with the EU

Canada and the EU have now completed the Comprehensive Economic and Trade Agreement known as CETA, requiring all EU member states to endorse it.
The UK can see this as a positive endorsement of the soft exit approach where a trade agreement can be reached without having to give any 'sovereignty' away.

The down-side here is that this deal took seven years of negotiation, nevertheless people are now asking if this could be a template for trade between the EU and BREXIT UK.
The deal with Canada means that most trade tariffs will be waived, allowing the EU to trade freely with Canadian businesses. The cost of the deal will have been some concessions made to the French-speaking Belgian region of Wallonia, who had concerns about competition for their farmers. The details of the deal don't seem to be public yet, but apparently the deal in temporary format will be signed off by all 28 member states over this weekend. Subsequently 38 national assemblies will have to ratify the agreement for it to be come a permanent legal document.

Although in some quarters, this is being heralded as a sign that the UK will be able to negotiate in the same way, the process will be lengthy and we don't know what obstacles will have to be overcome, and what compromises we might have to make.

28 Oct 2016


Having completed my introductory post regarding Brexit and trying hard not to let it degenerate into a rant..The first question this blog is going to look at is:

 'What are the choices? Hard or Soft?'

So the first point to make is this: Will there be a choice?' and you have to say that it is in itself a question worthy of it's own discussion.
Whether Europe will be open to a 'negotiated' exit or not is difficult to gauge because each member state may have a different stance, which may show us which other states might have their eye on leaving too. But taken as a united body, the noises coming out of Brussels indicate that the UK will have to quit altogether (A 'hard' exit). It is in the interests of the EU to imply at least that there will be no negotiation, as the first step of...well...the negotiation.

I imagine that the other member states will be interested in keeping trade links intact, they won't want to cut the UK off as the UK buys a lot of stuff from member states. Of course, if the EU doesn't negotiate as a whole, then the UK would be free to negotiate individually with each nation separately - which is really not what they want either. I would assume there are measures already in place to stop member states negotiating deals that the EU would disapprove of, but clever lawyers would no doubt be looking for loopholes and looking to circumvent the rules.

So let's assume that there will be something to negotiate...and get back to the 'Hard or Soft issue'.
In a nutshell then, a Hard exit would be to ditch any EU rulings and trade internationally through the World Trade Organisation. No single market access, no interference in UK immigration or indeed any other area of trading or law-making. Your basic 'back to square one' approach.
The Soft option however is more like a EU membership in all but name kind of approach where there will be freedom of movement of goods, people, capital and services pretty much like it is now. I guess the major difference will be in the law-making department, certainly the UK would no longer be subject to the rulings of the European Court of Justice.
The likelihood is that there will be a 'soft' exit where all parties can trade relatively easily - this will suit most parties involved in the discussions.

There remains though, some huge questions around free movement of people - which the BREXIT voters will be keen to point out was a major player in the NO vote. Also, we are being shown how hard-line the EU can be with it's attitude towards Canada's request to be a trade partner. It's difficult to call at this time, it's going to depend on how the big characters in the EU want to play it. We are definitely in 'make it up as you go along' territory, no-one has done this before, and the default position will be 'Hard' exit if the negotiations come up short. However, I can't help feeling there will be some compromise especially with the suspicion that Nissan have been assured access to the single market, following on from similar investment promises from Honda earlier in the year.

17 Oct 2016

How will Brexit change our Economic Outlook?

So, at long last, there is a new 'play-thing' for us amateur economists to pontificate over - BREXIT. It's not like we are completely out of the woods regarding our economy, and I dread to think what our national debt figure actually is - but the focus has certainly shifted off the good ole Credit Crunch lately.
I admit I am late to the table with this one, and had I been paying more attention to this blog, I would have broached the subject earlier, so apologies for that.

Cards on the table then - I was a 'Remainer', and it's not that I have any great love for Europe particularly, but I am against rocking the boat for no good reason other then a vague belief that Europe is somehow holding us back. I am in favour of the 'stronger together' philosophy hence I was in favour of the UK remaining united too. I find it odd that some Scottish politicians could want 'out' of the UK, but 'in' to Europe - but I'm not going to get into that on this blog.....

So the 'Remainers' lost and the Brexiteers won - fair play, we now have a slightly different political landscape to deal with, and some very tricky terrain coming over the horizon. I have moved on (others appear not to be able to do so), but the result was remarkable for a number of reasons.
I will happily accept that broadly speaking, there are some good points that we will gain from gaining a degree of independence from Europe, although I would maintain that we can't be sure that they outweigh the negatives. So I am happy to assert that many well-meaning Brexit supporters actually believe in a solid economic argument.
That said, there are evidently swathes of others who somehow thought that they were voting for some sort of ethnic cleansing to the point where they have been emboldened to shout obscenities at foreigners in the street. These foul types (NOT Brexiteers, but thugs who have seen Brexit as a means to some sort of white supremacy) have been sold a lie by UKIP who have emerged as little more than the BNP in a suit and tie. UKIP (where are they now?) were given an extraordinary amount of exposure considering how little influence they have on anything (Their biggest power base is in the European Parliament!! - you couldn't make it up...). Their mouthpiece Farage (where is he now?) painted a picture of an immigrant-free UK with a well-funded NHS, when he had not the means to bring it about - He 'won' a referendum, not a vote for seats of power. When the party was over, he freely admitted that he was not able to make any of his promises happen - and how could he? He's not even got a seat in Parliament himself - his party is a shambles, their policies are virtually non-existent.

Don't get me wrong please, my disgust at the situation is not because the vote was lost, this is not sour grapes - I am disgusted at how we were led to this point by people with no power and no plan, and now those who could see it was a terrible idea are left having to carry it out. Yet I am not an advocate of a second referendum - that to me would be a nonsense, it would be like Alex Salmond demanding a referendum on the Scots leaving the UK every year until he finally got the result he wanted. No, we must carry it through and make the best of the hand we have dealt ourselves. My real problem is as I mentioned earlier, the belief amongst mindless thugs, that this is a victory for 'Engerlanddd' in post-National Front and post-BNP Britain.

I am thoroughly English and proud of it, yet I would welcome any foreign national genuinely seeking asylum, seeking respite from awful regimes and terrible life-experience, seeking education and work - these individuals enrich and enhance our nation. I am ashamed of the rampant nationalists, and fervently hope their number remains small and insignificant. I am slightly concerned that in post-BREXIT Britain, a line has been crossed where it is becoming acceptable to regard 'foreigners' with suspicion and not a little hatred - Europe has been there before....

Well that's the political rant, I know not everyone will agree with me, and as long as you don't advocate thuggery, I am happy to discuss the pro's and con's of Brexit without getting overly excited. I am looking forward to exploring some of the questions that surround the huge issue of how exactly we are going to extricate ourselves from the European Union.

4 Aug 2016

Confirmed Base rate cut today

As expected, the news has just come through that the Bank of England has officially cut it's base rate for the first time in nine years, halving it from 0.5% to 0.25%.
Predicted growth in the UK economy has not materialised, and the Bank of England GDP forecast for 2017 has been slashed from 2.3% to 0.8%, citing changes in the 'economic outlook'. In effect pointing towards Brexit as a major factor.
The BoE has introduced other measures to go alongside the latest interest rate drop. A £60bn quantitative easing package has been announced alongside rulings that will more or less force the banks to pass on the base rate cut to their borrowers.
It has been calculated that the average mortgage saving will be around £20 per month, but it should be noted that only around one and a half million mortgages actually track the base rate. I am happy to say that my own mortgage does, but on the other hand, I have an endowment which will not meet the repayment target. Where I am saving on interest, I am paying extra off the principal to help to close the gap between likely endowment outcome and the principal amount owed.
An endowment is, of course an investment, so how will the interest rate drop affect investments? Simply put, if you had £10,000 invested, a 0.25% drop means you will receive £25 less than previously which should mean you get a measly £40 or so for your hard-earned cash. I can remember the days when you would expect to make a grand from a ten grand pot, so saving your money seems almost pointless if you are hoping to live off the interest.
The positives here are obvious for (some) home owners, but overall, with a falling GDP and little return on money in a deposit account, the general economic mood is not overly positive. That said, we are not currently on target for another recession, and there is every indication that there could be another base rate cut, which could leave us with an unprecedented zero percent base rate

Bank Base Rate drop expected today

After years of waiting for the next interest rate announcement, it may finally be announced today. Up until the Brexit vote, I am sure most commentators would have expected an interest rate rise to be the next Bank of England move, but post-Brexit Britain brings with it a somewhat less stable economic environment.
The new rate is expected to be a drop from 0.5% down to 0.25%, meaning an average mortgage saving of £20-£25 per month. Of course, many current mortgages are fixed rate and will not benefit from the drop.
More to follow when there is confirmation....watch this space

15 Jun 2014

Finally interest rates set to rise

Increasingly, even the most pessimistic observers are finding that the main economic indicators are signalling a strong recovery from the financial crisis some six or seven years later...

I am sure there will be politicians queuing up to take the credit just as there were those ready to apportion blame, but these things are notoriously cyclical - we always knew it would eventually resolve more or less regardless of the economic action taken by the various politicians.
The good news also comes along with the 'bad' news that interest rates are set to rise...and fairly soon. Again, we always knew this would be the case, but for those of us who have benefited from low mortgage rates, the reality of the end of the gravy train is just around the corner.
No definite dates as yet, but indications are that the end of this year or possibly early next year will bring a tentative rise in the current 0.5% base rate currently applied in the UK. I expect that it will be several years before the base rate reaches anything like it was before the dramatic drop five years ago.
Of course, I am calling it bad news as a mortgage-payer, but a net investor will be thankful that there is a prospect of getting a better return on investments at long last - also as my mortgage has an element of endowment, there is actually a kind of 'leveling out' of the good news versus bad news scenario even for me.
There is also speculation that this will slow down the property price rises that are starting to kick in particularly in London where housing is so tight, and seeing as it was in part, property prices that led to the original recession, this is possibly no bad thing...

Two basic questions remain then:

'When?' and 'How much?' there is a suggestion in the media that the rise will come before the general election in May 2015, maybe even well before. As for the new level, it will probably be set at 0.75% or possibly 1.0%. A full 1.0% would be more of a bold statement of intent and could be seen as a level that could be maintained longer-term, a mere 0.75% might leave the markets nervous wondering how long before the next 0.25% is added...
For those who have recently bought property on low interest mortgages, a rise in rates will be a new and unwelcome experience - although such a small change in rates is surely not likely to leave home owners without the means to pay their mortgages.
Personally I am currently still overpaying my mortgage, so for me it will simply be a matter of reducing my over-payment so that the overall outgoings remain the same.

Related posts:

Feb 2009 - imminent drop in interest rates
Mar 2009 - base rate set at 0.5%

21 Jul 2013

Signs of recovery

I have always said that recovery from this financial crisis was always going to be slow, and I don't mean months, but years maybe 5 or 6 realistically - and that's just an indication, not a prediction. So I don't take too much regard of the 0.5% growth predicted in the UK economy, to be fair 0.5% is better than -0.5%, but equally it's not a lot to get excited about. having said that, the evidence of building work going on around us at the moment is encouraging. I walked to work four times this week, and was struck by the amount of construction work that is going on. On the other hand, I walked through some flats that had been built in the last 6 or 7 years that were intended for the upwardly mobile - however they have seemingly now become part of a large social housing project, and starting to look a little less cared for.
Savings are down, which is no great surprise seeing as there is little available in the way of return for your investment, but inflation seems to push on regardless as wages are more or less static and therefore the nett result is that we are a little worse off year on year. The way that energy prices have risen over the recession is quite unbelievable, energy companies it seems, are determined NOT to be affected by the financial crisis and continue to hold us all to ransom, squeezing every last penny out of it's 'customers' or more accurately 'victims'.
We will come out of this, but it will take time, thankfully the lower interest rates are still keeping the mortgage payments low, so I am still able to overpay my mortgage - as with most people who have a mortgage, as a nett borrower, I am happy for interest rates to be low. In the long term however, investments such as pensions are also squeezed to pitiful growth figures.

27 Sep 2012

False Economy?

Whilst the economy needs steady management with long-term goals in mind, Modern politics does not really allow for long-term planning. Already the Greek population are striking against the government they only recently voted in, rebelling against austerity measures which are aimed at keeping the national economy solvent.

This feeling is not limited to the hardest hit of the European economies, grumbling about cut-backs is widespread, and if I am allowed to express opinion, I believe it is short-sighted to rebel against measures that will ultimately create a 'meaner and leaner' economy. The problem here is that the public are finding it hard to understand why the public purse has been tightened so suddenly, especially when they find themselves out of work when there are very few jobs to be had.

There needs to be a two-pronged approach, introducing more efficient use of public funds whilst enabling businesses to grow, however there is a problem in that putting more controls on bank lending means it is harder to obtain small business credit. Ironically, interest rates are at an all-time low, yet money is not avaiable to those that need it most

Here is another problem, we want to control the way that the banks take risks with loans, but on the other hand, we need the banks to fund regeneration in the economy - or do we?

With the reluctance (whether voluntary or forced) of the banks to lend out the required cash, other organisations are stepping in to lend a hand and provide a much-needed injection of cash. Maybe this will be a long-term change, a change in the way that industry is funded, maybe it will all get back to 'normal', but whatever happens, we are by no means in control of the economy yet which is why I believe only hard graft will get us back to an economic plateau, and only extraordinary diligience will stop this happening again in the future.