Money Crisis, In Simple Terms Please

[speedchick]

Ok I admit it, I am getting totally lost with all this that is going on with banks, money and whatever else at the moment.

Can someone please explain in simple terms, what all this is meaning for the average person? I don't have millions in savings (well I have about £3.00 in a B&B account), I have a mortgage. Am self employed so no pension/investments etc. But I just don't have a clue what all this is meaning, and I am sure that I can't be the only one.

So if someone could just explain it all for me, and what effect its likely to have etc, I would appreciate it, then I may have a chance of understanding the news when it's on.

Many thanks

[hal-finch]

google video.


Zeitgeist-the movie.

Zeitgeist- Addendum.


HTH

[anonymous-user]

Okay, as i understand it(and im .... a layman), the government will gaurentee upto £35,000 of your money in savings. the banks themselves borrow money from each other, hence what happened to northern rock and b&b, and so those banks that are lending the most are now making the most. Unless you have over £35k in savings, then you are unlikely to be affected, unless you have a b&b account with more than £3.00 in it, i think!

[Carreauchompeur]

Lack of inter-bank credit caused by irresponsible lending.

Puts the squeeze on consumer/business credit and sub-prime lending.

Spiral leads to lack of consumer/business confidence.

That's how I understand it, and reassure myself that it will all resolve itself soon!

[shadowninja]

Carreauchompeur said:

Lack of inter-bank credit caused by irresponsible borrowing.

This may help you understand things better.

[andrew.]

if, as 200k brits do, you have an account here, then you could be in for a little hassle, although you'll probably get your money back in the end...

http://www.icesave.co.uk/

[eldar]

shadowninja said:

Carreauchompeur said:

Lack of inter-bank credit caused by irresponsible borrowing.

This may help you understand things better.

People can only borrow iresponsibly, if other people lend irresponsibly. Too much money, too little sense.

[speedchick]

Ok thanks, I think I am getting it. Appreciate people taking the time to explain it.

As I have said I have no savings or investments, and I am not planning to move house. My mortgage is with the Abbey, which means I guess with Santander, so does that mean that Abbey will not be included in any of the plans that they gubberment are coming up with? And what sort of a state/condition is Santander in? (if anyone knows???)

[B17NNS]

speedchick said:

Ok thanks, I think I am getting it. Appreciate people taking the time to explain it.

Don't worry your pretty little head about it poppet.

http://www.youtube.com/watch?v=_lrJg8NMsFw

[Simpo Two]

Money has to come from somewhere. The impending collapse of Icesave is backed by the Icelandic government to the tune of 20,000 euros per account - but Iceland is wondering if it has enough money to pay everybody out... and then Iceland goes into liquidation as well....

Hence it's all very well badgering Gordon Brown to guarantee everybody's investments 100% - but if that debt is called in, then it's bye bye UK as well....

Edited by Simpo Two on Tuesday 7th October 21:08

[speedchick]

B17NNS said:

speedchick said:

Ok thanks, I think I am getting it. Appreciate people taking the time to explain it.

Don't worry your pretty little head about it poppet.

http://www.youtube.com/watch?v=_lrJg8NMsFw

Ha ha ha, very funny, I only have two more words for you honey, second one off, pick ya first!

[Windsorphil]

Nice overview here: http://en.wikipedia.org/wiki/Financial_crisis_of_2... with plenty of links to further reading.

[rt911]

speedchick said:

Ok I admit it, I am getting totally lost with all this that is going on with banks, money and whatever else at the moment.

Can someone please explain in simple terms, what all this is meaning for the average person? I don't have millions in savings (well I have about £3.00 in a B&B account), I have a mortgage. Am self employed so no pension/investments etc. But I just don't have a clue what all this is meaning, and I am sure that I can't be the only one.

So if someone could just explain it all for me, and what effect its likely to have etc, I would appreciate it, then I may have a chance of understanding the news when it's on.

Many thanks

Are you Gordon Brown?

[speedchick]

Windsorphil said:

Nice overview here: http://en.wikipedia.org/wiki/Financial_crisis_of_2... with plenty of links to further reading.

Thank you, shall have a read of that tonight

[Road Pest]

For you the consequences MAY mean that you will find it difficult to renew your mortgage deal when it finishes. I say may as I of course do not know your financial details We are certainly not doing much with self employed clients at the moment but we are referring them to other specialised brokers.

ETA that is the money crisis in a small part, lenders are tightening their lending criteria and taking on less risky business.

Edited by Road Pest on Tuesday 7th October 21:20

ETA +1 7 million fine to A and L today, signinificantly more than their profit, so I think that would meet the "crisis" criteria.

Edited by Road Pest on Tuesday 7th October 21:22

[speedchick]

Road Pest said:

For you the consequences MAY mean that you will find it difficult to renew your mortgage deal when it finishes. I say may as I of course do not know your financial details We are certainly not doing much with self employed clients at the moment but we are referring them to other specialised brokers.

Well I don't know if it's good or bad, but I am not on any special deal with the mortgage, (I have been receiving letters over th past year or so with small increases in payments required) I was in full employment when I took it over (It was a joint mortgage with my then husband, who went and died after the divorce without having taken me off it!), I know it's not fixed or anything, and I know that due to being self employed I am not likely to get another mortgage. So have no plans to change it, or the house for the forseeable

[Nitro...]

Road Pest -
Assuming you're in finance (A & L?) are people still being given personal loans?
If so, what criteria is needed to get one nowdays?

Ta.

[tinman0]

speedchick said:

Ok I admit it, I am getting totally lost with all this that is going on with banks, money and whatever else at the moment.

Can someone please explain in simple terms, what all this is meaning for the average person? I don't have millions in savings (well I have about £3.00 in a B&B account), I have a mortgage. Am self employed so no pension/investments etc. But I just don't have a clue what all this is meaning, and I am sure that I can't be the only one.

So if someone could just explain it all for me, and what effect its likely to have etc, I would appreciate it, then I may have a chance of understanding the news when it's on.

Many thanks

In simple terms.

The banks used to lend each other money for investments. Because a few chaps in the US defaulted on their mortgages, the banks are holding investments that may or may not be worth the original investment. Problem is, no one really knows if the investment is sound or not.

So....they've stopped lending each other the money.

Then.....

Some banks were lending money on a long term basis (eg Northern Rock) but borrowing short term money. When the money markets stopped lending the money to the banks on the short term basis, it left NR with a huge shortfall.

The same has more or less been happening across the board.

Consider the idea of a poisoned pass the parcel. The guys with the bad investments are in trouble in a big way.

To stop the banking section self destructing, the US taxpayer, the UK taxpayer, and the various European tax payers, via their respective Govts have been buying these bad debts from these banks.

This then allows the banks to remove some of this crap off their balance sheets, and hopefully instill a bit more confidence in the lending markets.

In the short term Mr & Mrs Average are no better or worse off. However, in the medium and long term, they will find it harder to borrow money.

Couple this all with an economic downturn where said banks have seemingly gambled on oil prices to make a bit of cash, where the EU pegged for no reason gas prices to oil prices, and because food is no longer cheap because Environutters wanted an alternative to oil so companies invested in bio crops, which has forced up food and fuel prices.

And then finally couple that with the fact that housing in the UK has got so expensive, and peoples budgets were tight to start with, you now have that perfect economic storm.

The problems really start when Mr&Mrs Average default on their mortgage. Which is in about 2 months at the rate we are going.

Or something like that.

Edited by tinman0 on Tuesday 7th October 21:36

[AM04ARO]

Banks take deposits and then lend it out with a decent margin for them to make a healthy profit.

The banks that have got into trouble have not taken enough deposits and relied on borrowing from other banks to balance their books (there is such thing as a capital ratio that must be maintained).

When either other banks stop lending to them or the margins the other banks charge make the margin they have lent at uneconomic they themselves no longer have a viable business and are then trading at a loss or unable to maintain the capital ratio they need (hence the need to raise capital) with the share price going down as people catch on.

The consequence to this is that the majority of lending will become more expensive as it would appear current rate of return on lending is too low to maintain - economic growth has been fueled by lending encouraged by government rather than profit/assets and we have reached end point.

[Road Pest]

speedchick said:

Road Pest said:

For you the consequences MAY mean that you will find it difficult to renew your mortgage deal when it finishes. I say may as I of course do not know your financial details We are certainly not doing much with self employed clients at the moment but we are referring them to other specialised brokers.

Well I don't know if it's good or bad, but I am not on any special deal with the mortgage, (I have been receiving letters over th past year or so with small increases in payments required) I was in full employment when I took it over (It was a joint mortgage with my then husband, who went and died after the divorce without having taken me off it!), I know it's not fixed or anything, and I know that due to being self employed I am not likely to get another mortgage. So have no plans to change it, or the house for the forseeable

If you're on the standard rate anyway then you will only be affected by Abbey's changes to their variable "base rate", which is determined by the rate/cost that banks lend to each other, and historically what the BOE set their base rate at. Although recently cuts to the BOE base rate hasn't reduced lenders rates due to the higher cost of inter bank lending.

My Buy to Let is now on the SVR and will remain there as it's cheaper than the Buy To Let rates. So as long as you can budget for 1 or 2% (hopefully at worst) increases in the rate of your mortgage you are OK at the moment. It may be worth asking your lender to fix your rate if you are worried about increasing costs. Feel free to PM me if you want to or their are a couple of IFA's on PH that may help you.