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.

2 Jan 2009

The outlook for 2009

There is no doubt we are sliding into decline at speed and every indicator points this way. As far as the housing market is concerned, the UK is in the steepest decline ever recorded with prices falling 16% in 12 months back to the level of prices more than four years ago. Spending and manufacturing output is down, and apparently a further drop in interest rates is being considered even though rates are currently the lowest they have been for nearly sixty years. The US is leading the way when it comes to low interest rates, and the Bank of England base rate has never before fallen below 2%. The rumours are that a further cut to take the UK base rate down to around 1.25% is on the cards very shortly with more cuts under consideration for March 2009.

There are no guarantees that tracker mortgages will follow suit, and Nationwide has already announced that it will go no lower than the current level of 2%. There is a clause in most Nationwide tracker contracts which allows them to charge a minimum of 2.75%, this clause was not invoked on the last round of cuts. Several other lenders have also said that they will go no lower than 2%, even though the UK government has urged them to pass on interest rate cuts to clients.


Rachel said...

My mortgage payments are really low at the moment - I cannot understand how the banks will make much money with them being so low. I wonder if we are going to see more banks going out of business and maybe even some of the bigger ones....

jay said...

Well in theory, the banks can borrow money very cheaply so they are still able to make a profit. Our tracker is about 0.7% over the base rate, so they 'make' 0.7% of the principal regardless of the base rate changes.
The banks are still charging way over the odds for things like overdrafts up to around 30% for small businesses!!