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The credit crunch and you

What has gone wrong?
The sub-prime crisis, which began in America last summer, has resulted in huge losses among banks and made financial companies very nervous about lending money to one other. As a result, the price UK lenders charge each other for funds - the Libor rate - has been rising.

Companies that borrow money to lend to mortgage customers have subsequently had to charge more for their loans. However, those lenders that raise money through deposits have been able to continue to offer cheap mortgages, but have been inundated by borrowers looking for the best deal. First Direct and Co-operative Bank both cited stretched customer service as a reason for pulling loans this month, and said they will re-enter the market once they have shifted the backlog of applications.

So can I still get a mortgage?
If you have a good credit record you should still be able to get a mortgage, but you may not be able to borrow as much as you could last year. Lenders have been reducing maximum loan-to-values (LTV) to protect themselves from households falling into negative equity.

You are no longer able to take out a loan for more than the value of the property you are buying and it is becoming increasingly difficult to find lenders who will consider giving you more than 95% of the value. Halifax recently reduced LTVs from 97% to 95%.

Will I have to pay a lot?
Not necessarily. There are still some relatively competitive deals available, although it is anyone's guess how long they will be around. HSBC is offering a two-year, fixed-rate deal at 4.99% (to replace the one First Direct withdrew), while Cheshire building society is offering a rate of 5.14% fixed for two years, However, both loans come with an application fee of £1,499, which means they are only worth considering if you have a large mortgage.

If you were considering taking a tracker mortgage, with a rate linked to the Bank of England base rate, you will pay much more than you would have last year. The base rate may have fallen, but lenders have been increasing their margins.

According to research firm Defaqto, since last July the average margin on a two-year tracker has increased from 0.49% above the base rate to 1.17%, meaning the cost to borrowers has gone up from 6.24% to 6.42%.

Earlier this week, some lenders started to adjust their standard variable rates upwards as well, which means discount deals are also increasing in price.

How about other borrowing?
The cost of personal loans has also been rising. Recently, Moneyfacts revealed that the cost of borrowing £1,000 had increased by 4.5% since last March. Rates on larger loans have not jumped by as much, but lenders have been getting stricter about who they will lend to. If your credit record is less than perfect you may struggle to get a loan.

If you have been turned down, you may need to work on improving your credit record.



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What's causing the rise in food prices?

Submitted by Garrett Kautz on 2008-04-26 08:19 — last modified 2008-04-26 22:20 — sustainability
For many of us, we're wondering what factors could be contributing to the increase in food prices. We've discussed many of these in class, but Tom Philpott, writer for Grist and an organic farmer in North Carolina, has written a piece that looks at some of them. You can read the whole article HERE . For those intelligent folks that can read through the lines, here's the bare-bones version: 1. Biofuels. 2. Australian drought. 3. No government grain storage. 4. Neoliberal policies. 5. Increased meat and dairy demand in Asia. 6. High energy costs. 7. Speculation. 8. Box store's "just in time" inventory method.


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Is there an Oil Shortage

There is no shortage in oil supplies. The following support this claim

Ed Wallace of Business Week recently reported that “that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%. Production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter. The net result is that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today.”

So why are oil prices rising:

The answer, in a nutshell, is: war and geopolitical instability in oil markets. Contrary to the claims of the champions of war and militarism, of the Wall Street speculators in energy markets, and of the proponents of Peak Oil, the current oil price shocks are caused largely by the destabilizing wars and political turbulences in the Middle East. These include not only the raging wars in Iraq and Afghanistan, but also the danger of a looming war against Iran that would threaten the flow of oil out of Persian Gulf through the Strait of Hormuz.

The fact that the skyrocketing oil prices of late have been accompanied by a surplus in global oil markets was also brought to the attention of President George W. Bush by Saudi officials when he asked them during a recent trip to the kingdom to increase production in order to stem the rising prices. Saudi officials reminded the President that “there is plenty of oil on the market. Iran has put some 30 million barrels of oil that it can't sell into floating storage. ‘If we produced more oil, it wouldn't find buyers,’ says the Saudi source. It wouldn't affect the price at all.

Impressions of an oil shortage are further bolstered by Wall Street and its financial giants that are taking advantage of the insecurity created by war and geopolitical turmoil in oil markets and are making fortunes through manipulative speculation in commodity futures markets.


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