Getting tired of the ‘credit crunch’?

27 June 2008

I don’t know about you, but I’m getting a bit sick and tired of the words ‘credit crunch’. As a financial journalist I’ve spent the best part of a year trawling through page after page of worrying headlines, depressing stories and even gloomier predictions about how we’re all seemingly ‘doomed’.

Over the past few days there’s been some real gems:

‘King and Darling issue bleak forecast’ – Financial Times
‘Property prices to fall 9%’ – The Independent
‘Brace yourselves: Low pay rises and rising bills’ – Daily Mail
‘Energy bills to leap by 40% (Just as we told you)’ – Daily Express

Yes - the UK’s economy is stalling, yes - property prices are falling and yes – we’re in for a difficult 12 months as ahead as the price of food and fuel rise. But are the mainstream media forgetting the (*whisper it quietly*) positives that could come from the credit crunch?

1) The age of cheap finance is over
For years we’ve all binged on cheap and freely available credit. Banks fell over themselves to lend more money, to riskier and riskier borrowers, and now they’ve had their fingers burnt. Is it not a good thing that those who can’t afford credit cards, mortgages and loans aren’t able to get them?

2) Sensible house prices
As a homeowner, I hate seeing my house fall in value as each month goes by. But one of the main causes of soaring property prices was that it became all too easy to get a mortgage. People seem to forget that your home is for living in – falling prices only make a difference if you need to sell, and if you need to buy it won’t just be your home that’s fallen in value either. There are thousands of potential first-time buyers itching to get on the property ladder, and although ‘negative equity’ is becoming a real problem for those with 100%+ mortgages, house prices have historically been a good bet over the long-term.

3) A change in our attitude to spending
With any luck, the credit crunch will force us all to reassess our spending habits. We seemed to have lost the attitude of saving before we splash the cash that our parents and grandparents who experienced the war years have. Maybe now we need to start taking a leaf out of their book.

4) Savings on the up
The media also often forgets that there are thousands of people out there who are lucky enough to own their home outright. With banks screaming out for funds, savings rates are at a seven-year high – excellent news for those who want to build up their nest egg.

5) Greater regulation
And finally, the credit crunch will stand us in good stead for the future. The collapse of banking giant Northern Rock showed how the Financial Services Authority (FSA), Treasury and Bank of England dropped the ball. Hopefully the greater regulation that will be brought in will mean that we’ll never see another run on a British bank again.

Don’t get me wrong, I own a home that I’m seeing fall in value as each month passes, I’m having to scrimp and save to be able to afford my monthly mortgage payments, to pay my gas and electricity and put food on the table. Maybe I’m playing devil’s advocate, but if the credit crunch means that we have to become sensible with our money again, isn’t that a good thing?

Liam Tarry is the staff writer at Moneywise