Wednesday, 8 October 2008

Where is this credit crunch?

The world is fourteen months into the credit crunch, yet it has not appeared in much of the data.

Sure, housing credit is harder to obtain in the sense that banks aren't giving out liar loans, high LTV loans or high income multiple loans. Nevertheless, if you go to a bank with a 20 percent deposit and an income of about two and half times your loan request, then the banks will say come on in and take a seat.

Today, the Fed published the latest US consumer credit data. As you can see, it isn't too hard to detect a credit crunch bank in the early 1990s. A few years of flat credit growth is clearly visible. Only in August has credit flatlined.

My sense is that the credit crunch might only be kicking off now.


electro-kevin said...

Now that's an interesting point.

aSteve said...

I think that the extension of credit is mainly to bad debtors... so, while the credit expands, it is mostly bad debt - hidden by the extension of more credit.

If I accepted bar tabs, but charged interest on these bar tabs... there'd be a problem if people could put their interest on the bar tab. Same thing here.

On a practical note, I'd be very interested to know exactly which lenders welcome borrowers - and what terms they're looking for - and their terms. I'm sure that the situation changes rapidly... but it isn't reasonable to visit a dozen lenders every month to ask "and what's the deal now?"

I've been given the impression by several lenders that no mortgage is likely to be issued at any income multiple with any deposit. I didn't press the matter, of course... and, since they didn't have my details in front of them, I don't think it was a comment about my own credit worthiness.

Anonymous said...

Do you have something similar for the UK?

Anonymous said...

"an income of about two and half times your loan request" looks a bit front to back to me.