Sunday, December 7, 2008

Will this fix the small business problem in UK?

HSBC makes £1bn credit available

Banking group HSBC says it is making £1bn ($1.4bn) in extra credit available to support small British businesses. The government has been demanding for weeks that banks resume lending to firms struggling as credit dries up.

Posted by alan @ 10:34 AM (878 views)
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11 thoughts on “Will this fix the small business problem in UK?

  • £1 billion to existing businesses. This is why they have just closed their commercial broker unit – they’re no longer interested in lending to new businesses.

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  • Re The article, this money will be available to companies with a sound business plan, I suspect companies needing money will not be considered to have a sound business plan.

    Connected to HSBC but not the actual article :

    HSBC are now offering a variable rate mortgage at 3.64%. It’s available Interest Only or Repayment with the option to repay capital sums without penalty.

    It does require a 40% deposit. Using their calculator they seem to be offering 4x joint salary.

    As a matter of interest a £245k mortgage would cost £ 744 per month Interest Only or £1245 per month repayment.

    What is interesting is that a house that was £565k has been reduced to £450k (and not sold in over 6 months at that price).

    Effectively to buy this house has reduced (assuming a £200k deposit) from £1825 per month Interest Only (based on 6% and original asking price 18 months ago) to £744 per month Interest Only now)

    That is a reduction of approaching 60%.

    To put it into perspective if one had £200k in the bank as savings it would be producing roughly £6k p/a after tax.

    To rent a 3 bed semi with garage in a good area (South East) costs between £850 – £1250 per month.

    The above example house for sale is a 5 Bed detatched with double garage – in a good area.

    Oh and did I mention the government will help cover shortfall on my mortgage due to reduced income. Not sure they will on my rent.

    I open the debate.

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  • str 2007 said…

    The Debate

    Yes all good and fine nice cheap credit !!!!!!

    Until rates double from 2% to 4% <<<< Not exactly inconcievable in the next 2 or 3 years .............................. Maybe even to 3 times or 6%And of course you need a job to pay it constantlyAnd is £450000 a reasonable price - when the £ was at 2 to the $ you would have got 8 bedrooms and 1/2 acre for that in the US ( a good area )Its all relative.... for me the danger signs are still there, i still think interest rates will have to rise as basically i dont have faith the UK government know what they are doing, the BOE MPC - well they just do what they are told they are really there to make it look independant

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  • I forgot to add >>> Rents are falling fast, just noticed a 4 bed place in a nice area ( Guildford ) for £750 a month and a years contract confirmed !!!!!

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  • Rimmer
    That is cheap rent.
    For reference there was a 5 bed for rent in the same road as above example and that was on at £1495 – just to give some perspective to my example.

    I fully agree that USA/Canada is much cheaper for housing, as is France.

    I guess the question/valuation is though based on the build cost.

    To have said house built would cost roughly £200k. (yes you could build it yourself for £130-£160k but then you’d need to take at least a year out not earning to do that so it’s swings and roundabouts).

    A 200k build cost would then value the plot, planning permission and infrastructure (roads, sewage etc) at £200 – 250k.

    Not cheap I agree, but also not wildly expensive.

    Re: the cheap credit. That was my point. 3.64% now and likely to come down a little more.

    Would it be possible to get a longer fix at say 3-4% in a few months time (currently all the longer fixes are 5-7%).

    And lets not forget that yes things will be tough over the next 2-3 years and although unemployment will rise to 3 million, about 80-90% of people will still have their jobs.

    My point is that whilst in theory prices have another 30% to fall, we should be keeping our eyes open as the falls may not just come in the form of the capital amount of the property.

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  • This is good you’ll like this

    The rent example I gave earlier at £1495 p/m has just come down to £1250 p/m

    A figure I was considering offering but thought they wouldn’t accept – just goes to show .

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  • it_is_going_with_a_bang says:

    “fundamentally sound businesses”

    So that rules out about 70% of the Small Businesses looking for funding in a recession.
    It’s all hot air. What ever is ‘said’ publicly means nothing. They will lend as they please as they always have done.

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  • it_is_going_with_a_bang says:

    The phrase

    “computer says no”

    … is going to be heard a lot more!

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  • str 2007 said…

    A Good debate……

    However you are convinced the current plan Gordon and Badger have will keep going, look at things historically and i think they have set the motion for very very unsettled times, as i said earlier i can really see Rates “Having” To be raised, i really dont know how much hard cash is being positioned outside of the uk but i noticed the first media signs of doubt today, i would expect it to be in the £ Billions per week – Why would you or i ( or any international fund manager ) now bring our investment fund worth £100 Billion for safe keeping in the UK?

    As to build costs there are taxes involved naturally but costs for a 4 bed house are around 180K and for a 3 bed round 160K ( which really shows how daft it is to pay 70K more for a 4 bed – sales hype ), land costs – well depends “WHO IS AROUND AND NEEDING HOUSING ” >>> A survey a few years back said UK population to decline by 2020………Guess why we have had excessive immigration the past few years ( estimated at 6 Million by the way )? – I wonder what would happen if the UK couldnt employ all the immigrants any more?

    Unemployment will pass 3 Million easy early 2009 and i expect it to go to 5 Million.

    For myself i remember the days houses were liabilities rather than assets…..Could that return ?

    Other facts not to forget is Taxes – all the bailouts, social services, help for house holders, cuts in VAT Etc Etc is done with borrowed money………………Borrowed from who and paid back at what IR? ………………….. Well its certainly not paid back at 2% thats for sure and expect the basic tax to be raised as well as all others. Once the problem is over ( they think a year ) expect life to get even more expensive – there are no free lunches, if after a year the UKs no better ( we all know it will be far worse ) god only knows what they will do, certainly they will be desperate to stay in power so this side of an election the world is rosy, after that its the Conservatives problem but wont be pretty.

    Any way back to what is fair price in the SE of the UK ( Not London ) – well its all confidence and affordability, houses have “NO” value really certainly if you cant sell a house they are worthless, for me in the free market i expect 3 bed detached ( estate based ) to go to about 200K and 4 bed to go to 250K……………Build costs are falling rapidly like rents so my quote of 180K is probably 160K now and likely to go to 130K or 140K ……………I remember the last recession you could get brickies for the minimum wage just to get some work.

    AS YOU SAY ITS ALL RELATIVE !!

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  • STR

    Quote “And lets not forget that yes things will be tough over the next 2-3 years and although unemployment will rise to 3 million, about 80-90% of people will still have their jobs.”

    All very true but who can tell who the 10% will be, actually i think the UK is something like 66 Million, 1/2 that figure are under 20 or over 65 that leaves 33 Million ( or there abouts ), 5 million unemployed ( not unrealistic ) would be towards one in 7 of working age unemployed…………….Would you really want to borrow £****** given the chances?

    I was made redundant in 1992 and there were Zero jobs at the time, i had to take a lower paid job and couldnt afford the mortgage – Massive stress and it almost cost my marriage…………there will be few takers for huge loans until things improve its all about fear and worry ( confidence ).

    A drop of 3% in UK rates has me spooked as its drastic action >>> Shows me things are really really bad and far worse than is being let on………. I see the markets view it the same way as otherwise we would have seen a rapid 10% or more rise in the FTSE.

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  • STR 2007 – i would go with £1000 and tell them they best take it while they have an offer

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