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How to beat the ‘credit crunch’
What’s the ‘credit crunch’ and what caused it?
A year ago, few people outside of the financial services industry had heard of the term ‘credit crunch’ but over the past year the phrase has entered everyday language and conversations. Defined as ‘a severe shortage of money or credit’, the ‘credit crunch’ began after US interest rates rose and the US housing market began to suffer, with prices falling and a rise in homeowners unable to meet their mortgage payments.
Default rates on sub-prime loans - high risk loans to clients with poor or no credit histories - rose to record levels.
Banks around the world began to reduce their lending to each other because they were uncertain about how much money they had and this in turn resulted in them becoming less willing to arrange loans and mortgages for individuals and businesses.
How do the moves in the stock market affect me?
For many people the operation of stock markets across the world will be quite a mystery. But the fluctuations of share prices can affect all of us - often in a more direct way than many people realise.
Your pension, your child’s savings, the value of your home and your job security can all be affected, not just the value of your investments.
How can I beat the ‘credit crunch’?
Mike Urmston, Acting Chief Executive of Police Mutual commented on the current financial climate saying: “I’m telling all my family, friends and colleagues that the days of easy credit are over.
My personal view is that it will become increasingly difficult to get credit and everyone needs to take greater responsibility for their own financial welfare. We all need to recognise what’s happening in the money markets and take ownership of our finances by starting to save for what we want to buy in the future.”
Mike Urmston’s comments echo the plans of the two major UK political parties. The current Labour government plans to launch a national savings scheme next year and the Conservative Party has recently announced that if elected it would offer tax cuts for savers, designed to create a culture of "save, save, save" rather than "spend, spend, spend".
What can I do to improve my finances?
There are a number of websites that can help you gain a better understanding of your finances to assist you in beating the ‘credit crunch’.
The Financial Services Authority’s (FSA) website -www.moneymadeclear.fsa.gov.uk - gives you the facts about financial products and services, helping you to make an informed decision. Police Mutual has worked in conjunction with the FSA to make financial education material available to members of the Police Family.
Visitors to www.pmas.co.uk will be able to find out more about our products and services. You can also access our ‘tools and guides’ facility to find tips on keeping track of spending and how to plan ahead with different ways of saving and investing. The following are just some of the features available:
• Budget calculator - helps you to work out your monthly outgoings and what you have left over
• Savings made clear - how to get started and the importance of saving
• Investments made clear - explains the most common types of investment products, how they work and what to think about before choosing one or more
• Insurance made clear - how to protect yourself and your belongings and how insurance products work
• Homebuying guide - tips on avoiding mistakes and advice on every stage of the house buying process
• Pensions made clear - shows you how pensions work and describes the different types of pension that are available
“I would strongly urge everyone to visit these websites and make the most of this valuable learning resource. They provide you with a better understanding of your financial health and help you plan more effectively for your future,” said Mike Urmston. “For over 80 years Police Mutual has offered financial education to the Police Family via free workplace seminars, so the Society’s website is a natural extension of our work.”
As the UK’s largest affinity friendly society, with around 180,000 members nationwide, Police Mutual is dedicated to providing savings, investments, pensions, a mortgage service, insurance products and financial education exclusively to the Police Family.
