Barclays Wealth director and head of local markets Greg Ellison. (0550722)
How has the crisis that has rocked the world affected the island? More senior members of the business community continue
our look at the credit crunch one year on
House sales fall as the purse strings are tightened – Greg Ellison
‘It doesn’t always follow that temporary volatility in the UK and global economy is replicated in Guernsey, However, it has been impossible to avoid the fallout.’
‘The cost of borrowing and stricter lending criteria being used by banks have caused problems for existing borrowers and for those buying a property.
‘Existing borrowers can shop around but the range and options are no longer there and in Guernsey this is compounded by the fact that it is not easy to swap lenders because of the costs of registering a bond and valuation and lending fees.
‘Those buying houses need significant cash reserves as most lenders in Guernsey will only lend up to 90% and so meeting the cost of the 10% deposit and the purchase costs, which are approximately 4%, is now even more difficult.
‘Despite this and unlike in the UK, there has been no real noticeable fall in house prices, although the number of property transactions in the first six months of this year is down by approximately 25%.
‘On the savings side, Barclays Wealth has noticed that both existing and potential clients are more discerning when deciding where to place funds and it is now common for clients to look at credit ratings, which was almost unheard of just a few years ago.
‘This is especially important in Guernsey where there is at present no depositors’ protection scheme in place.
‘The cost of fuel and food is also having an impact on the budgets of Guernsey residents and there is no doubt that everyone, especially those on fixed or low incomes, are looking at both their personal expenditure and are also more diligent in checking rates of interest.
‘Guernsey is feeling the effects and there has definitely been some tightening of personal and commercial purse strings but hopefully things will stabilise. The challenge now is for the States of Guernsey to keep inflation under control as the headline rate in June was 5.5% which is up from 4.8% at the end of March and is the highest it has been since 1991.’
Article posted on 12th August, 2008 - 12.45pm
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