Make money with the credit crisis

It is very true to say that “every cloud has a silver lining.” Similarly, “what goes up must come down.” For every situation that seems hopeless, lonely, and miserable, someone somewhere is benefiting, even if it doesn’t seem that way at the time. The credit crisis is now a year old and its effects, along with the spike in oil prices, have meant that the average Briton has far less cash in their pocket than at this time last year. Food and fuel prices have skyrocketed, driving inflation to record levels. The housing market has bottomed out, which means the new mortgages that poured so much money into the economy have stopped. However, it is in my nature to try to find out who is profiting from this financial chaos. Here’s who I feel should shrewdly thank their lucky stars that the credit crunch started.

1. This may sound counterintuitive, but banks must be making more money now than at any time in the last 10 years. Hundreds of thousands of people who would normally have looked for a new offer at the end of their fixed rate have had to stay with their own bank. They are now paying the standard variable rate, usually more than 7%. Granted, banks are seeing more arrears and repossessions, but the actual number is minuscule compared to the number of good payers who are shelling out more cash than ever before. I think the banks and building societies that will have done the best with the crisis will be the UK ‘balance sheet’ lenders that don’t have big subprime interests, namely Abbey, Nationwide, Lloyds TSB and Barclays. HSBC is a global concern, so whatever happens in the UK will be affected by events elsewhere. HBoS has its fingers in so many cakes that they may be further affected by situations like the oversupply of new build flats in northern cities and RBS has been heavily involved in the securitization market.

2. The budget supermarket chains are having a field day. A vox pop in the tabloids recently contained a multitude of comments such as: “I always used to shop at ASDA, I go to Aldi a lot more now” and “I come to Aldi now, it’s a lot cheaper. At ASDA I used to spend £100 a week, times more. Aldi is half the price, so I can afford better food. It’s important to buy healthy fruits and vegetables, especially since I have a 5-year-old son.” It looks like budget chains like Aldi, Lidl and Netto are having a field day. While Asda and Tesco have their own value ranges, many have stopped shopping there altogether rather than markdown, perhaps due to the stigma of standing at the checkout with the value brands when everyone else has the usual. At least at Aldi everyone is in the same boat. Asda and Tesco may see reduced sales, but I suggest Aldi’s gain is more likely to be at the expense of more “convenient” style stores like Spar, Co-Op and London, which charge more to give you the convenience of an opening more prolonged. time and place.

3. Buy-to-let investors will soon make a comeback. The best offer of BTL mortgages accumulated at 85% is now down to 5.89%, almost to pre-credit crisis levels. With prices beginning to show signs of leveling off (at the bottom of the ladder, still a long way to go elsewhere), “feed the bottom” investors will soon have a field day.

Thinking along the lines of “every cloud has a silver lining,” I’m sure you, too, could spot some profitable opportunities that the credit crunch (soon to be called the 2009 recession) has thrown up.