The International Monetary Fund and the Paris-based Organization for Economic Cooperation have scaled down the growth potential of the USA, the Euro zone and Japan. The international organizations have come short of declaring that a recession had almost hit USA. Despite of better economic fundamentals in the European and the emerging Asian economies, the aphorism, ‘when America sneezes, the rest of the world catches a cold’, remains nonetheless true. A credit crunch in the USA will have an adverse affect on the global economy via its strong global linkage effect.

With cheap housing credit having flooded the British economy for over a decade, consumers have suddenly countered unusual stringent lending norms from the mortgage market. First time buyers are finding it difficult to borrow at high interest rates. The Council of Mortgage Lenders has estimated that up to 1.4million Britons would face a sharp rise in mortgage repayments this year when their fixed repayment deals end. Investment advisors are saying that the re-mortgage deals might not be as unattractive as they seem to be in the current circumstances.

If it is possible for the borrower to clear some of the debt ahead of the re-mortgage date it might help. If you are able to pay more than what your mortgage lender requires and even if it is only a small amount each month then financial advisors say then you should do so. Overpaying helps in saving thousands of pounds in interest and cut years off your mortgage term. People who are lucky enough to receive large annual bonuses should consider paying off a certain chunk of their debt every year that would dramatically reduce the length of the time taken to clear the debt.

Avoid being caught in a debt trap while trying to clear your major loan. People often resort to personal loans to consolidate debts. This measure might be successful only if an individual is cautious enough to clear their debts only and not using the excess funds on going on a spending spree.

Try to build a good credit rating as that might help in being charged a lower interest rate. Check your credit records regularly. Insure your income in case you are unable to work and always look for help as earliest as possible.

Apart from the banking, financial services and the property sector the rest of the UK industries appear to be riding out the credit crunch and the impact of tougher borrowing environment has had little impression on the corporate failures. According to a study by the global information service company, Experian, the number of businesses failing in 2007 declined by 8.9% as compared to 2006. In fact, UK has witnessed a 1% growth in consumer spending in the last month with a rapid decline in the unemployment rate.

Source: TimesOnline
Image: NicholsonCartoons204664