Business Changes In Personal Loans Of 2019

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Do we look forward to 2019 with hope or trepidation? There are threats on the horizon but how likely they are to be realized, and how severe they will be if they remain to be seen. A brief analysis will help dispel the myths and allow clear judgments to be made as we ride into the new year.

The property market is one of the key factors in the economic health of the nation. Unfortunately, every sector of it has shown itself to be heading for a downturn. The UK housing market has been regarded as something of a bubble, with a raft of high-profile economic bodies rating the UK property market as over-priced in the region of between 10% and 30%. Commercial property has already been hit by a slump and faces continued declines. Similarly the collapse of the sub-prime buy to let market and a fall in tenant demand for flats means that the short-term outlook looks very unfavorable for many buy-to-let property investors.

Inflationary pressures remain strong, continuing to put pressure on the Bank of England. While they rode out above-target inflation for almost a year over 2017-2018, we may find the bank in a similar predicament over 2019. As warned in August food prices have also seen a dramatic rise in price over this year, and the situation hasn’t improved as the movement from agricultural production for food gives way to agricultural production for biofuels. Rising food costs means less consumer spending in other areas, which has a knock-on effect on retail sales, reducing company profits, and therefore pushing share prices downwards in key areas. Recent moves by the Bank of England cutting interest rates to stimulate the financial markets has had an ugly inflationary effect. Cutting the lending rate helps devalue the pound, and reduction in the value of the pound to the dollar increases the price of commodities in real terms, further compounding inflationary issues.

Britain continues to hold the highest amount of personal debt of any European country, accounting for one-third of all European debt. With nearly 2 million households currently moving from low-interest fixed-term mortgages and now being hit by higher variable mortgage rates, it leaves consumer spending and debt issues very sensitive to further adverse changes in economic conditions. Over the course of the economic boom we’ve enjoyed over the past 10 years, rather than save, the UK government has accrued increasing national debt. The figure now stands at a £20 billion deficit, almost 5% of GDP. One can only fear what will happen as adverse economic conditions impact, and the cuts the government will need to apply to stop this debt spiraling out of control. Of course, it also needs remembering that the UK government is currently funding Northern Rock to the tune of nearly £30 billion as well…

The Credit Crunch has rocked financial markets, but we’ve only seen the opening salvo on what continues to be seen as an unparallel event in financial history. The main impact has been a tightening on lending, with mortgage lending already in decline. Products in the mortgage and personal loans UK market associated with increased risk are being offered on a far more restrictive basis. Until all balance sheets clearly demonstrate where the bad debt from the US mortgage crises is held, investor uncertainty will remain. Estimates suggest as much as $300 billion in mortgage defaults will hit the credit market. The serious problem is that as much of this was used to leverage larger investment, so $300 billion could have been used to secure as much as 100 times that amount. This is why it is not overstating the problem to say that we’ve not seen any comparable economic situation since the 19th century.

In the face of the above, it’s obvious that the economic wheel is turning full cycle, and that potentially very adverse conditions face us, not just through 2018, but also in the years that follow. Recession is a potential reality, but even worse is that is the possibility of stagflation, which would see the economic wheel stall. The problem is that each of the above-covered conditions invites further economic woe, helping to feed further corrective economic processes that will bite hard. It’s easy to take a “gloom and doom” approach to financial forecasting, but so far various other economic factors have helped provide robustness and stability to the overall situation – but those factors will increasingly erode.

The simple fact is that economic cycles are entirely natural and healthy aspects of growing economies. However, the seriousness of the current situation is underlined by the extended boom period and serious flaws at the very foundations of the international financial markets. While these issues may be beyond the control of the ordinary person, the one thing we can all do now takes proper responsibility for our own micro-economic situation within a worsening macro-economic situation. If ever there was a time for proper management of personal finances it is now – because the summer of plenty is ending, and the cold winds of an economic winter of discontent are blowing. It’s time to wrap up warm.