The Housing Chronicles Blog: The end of cheap credit

Saturday, March 22, 2008

The end of cheap credit

Even when newspaper and magazine articles were following the rise of cheap debt, they still acknowledged that it would someday come to an end. That end may be here, so what does it mean? From a Washington Post article:

Mounting turmoil in credit markets could realign the finances of households and businesses, as banks scramble to bolster their balance sheets and jettison risky customers.

For consumers, it could mean fewer credit card offers. For home buyers, it will mean tougher mortgage conditions. For many businesses, it will mean a substantial increase in borrowing costs and possible postponement of capital spending plans...

While most economists have long said that Americans need to borrow less and live within their means, the sudden, lurching nature of recent financial markets isn't what most of them had envisioned....

Commercial real estate firms are also in danger if they have relied heavily on borrowed funds for projects still underway.

"It seems that the huge economy of the United States is getting a huge margin call from the whole world," said one investment banker who spoke on condition of anonymity because he was not authorized to speak on behalf of his firm.

No comments: