What is the credit crunch?

[Slade]

So I am on a bit of an article spree today :)

Just found this one that I figure may be useful to those of you who aren't sure what is happening in global markets that is causing so much turmoil.

The credit crunch explained | NEWS.com.au (http://www.news.com.au/business/money/story/0,25479,24100335-5017313,00.html)

So, how are you affected by the credit crisis? directly? Indirectly? Are you doing anything to combat it?

[The Y-man]

Main effects seem to be Interest Rates - getting high.

We have sold of some of our investment assets to pay of our most expensive loans.

We are actually rolling over credit card bills, as CC companies offer very attractive rates (eg 7.99% for life of loan at AMEX). This is cheaper than our home loan (almost 9%), so it makes sense to use the money that would have paid the cc off, to go into the pricipal of our home loan instead.

Cheers,

The Y-man

[The Y-man]

Main effects seem to be Interest Rates - getting high.




Interesting to note almost half a year later - interest rates have eased - HOWEVER, getting loans seem to be heck of a lot harder. In fact, try getting a limit increase on your credit card - you might be surprised how reluctant some companies are....

The Y-man

[Brendan]

That's true, it will be interesting to see if Australian interest rates will fall as far as the UK/US, I personally don't think they will. I believe that they will fall again but not considerably - possibly 2% or so.

I think its not to bad that its harder to get credit these days, it was waay to easy to get credit previously, I had friends that were earning $500 a week buying 50k cars with ease, getting store cards like they were going out of fashion, and holding on to numerous credit cards with little ability to manage their funds correctly to pay any of them off.

Hopefully now regulations will tighten just enough to stop that from happening, but to allow real investors and people who can properly manage their funds to borrow as per usual.