David Cameron is attempting to convince us that we are all turning into savers and cutting back on the credit that is supposedly still freely available. He’s doing this of course to try and soften the blow that is surely coming to the UK because its not us cutting back on credit – it’s the credit companies who are cutting back on us – and he knows it.
That’s why the Bank of England has just added another £75 Billion to the economy – In the hope the banks who get it will start offering loans again to the people who actually need them. At the moment, the only customers having any success with their loan applications are the ones with grade A+ credit ratings.
Lenders are currently cutting loan rates in a price war for your business – only home owners with middle income salaries and a paid off mortgage need apply, thank you very much…..
Here’s what Guardian Money said on the subject:
We haven’t suddenly turned into a nation of prudent savers, carefully counting the pennies; we haven’t suddenly stopped responding to TV or press advertising. What has changed is that the easy money of the pre-credit crunch years has simply disappeared.
Take the credit card market. Five years ago it was perfectly possible, and indeed the banks encouraged us, to have 10 or more credit cards. Consumers could bounce debt from one provider to another, exploiting 0% fee-free transfer deals. Money, it seemed, had become free.
The banks thrust credit card cheques through the doors of households, no matter how poor. Just fill in the sum you wanted, and buy a new car or “dream holiday”. It didn’t matter what the cash went on.
The fee-free transfers disappeared first. Bouncing debt from one credit card to the next now incurs a fee of 3% or so of the balance. Next went the credit limit. Banks have slashed limits on cards and cut overdraft facilities, many by half. Up went interest rates, with the typical card now charging 18%-25% – 50 times the Bank of England base rate. In came credit checking. Before 2007, a missed payment or two was forgiven. Now it means you will be refused credit.
Personal loans are the same. Before 2007, the money pages were full of adverts offering £5,000 loans over three years at interest rates typically around 6%-7%. Today, there are still a few personal loans at those sorts of rates, it’s just that the people who previously took them out wouldn’t stand a chance of getting them today. What’s the interest rate on a personal loan for someone with the typical “fair” credit rating? A check on Moneysupermarket.com suggests the rate will be between 18.9% and 62.1% – but that’s only if the applicant is accepted.
Mortgages have followed a similar route. Why bother to save when Northern Rock was offering a loan for house purchase not at 90% of the value of the home, but at 125%? You got the car and the holiday thrown in for free. Today, “prudent” buyers are having to save for deposits worth a quarter of the (inflated) price of the home, but not because they want or desire a larger downpayment. They just have no choice. Read the full article here.
The country is in a mess and people like you and me who had money thrown at us by the banks and credit card companies and went out and spent it just like the Governments wanted us to so that we would keep the economy going are now being blamed while the Government turn a blind eye to the banks and lenders responsible.