Beating the credit crunch

Read our blog post for our advice on beating the credit crunch - everything you need to know.

Beating the credit crunch

The credit crunch is biting. What started in the US as a mortgages issue, with lenders giving finance to people who would not normally qualify as credit worthy, has spread to dent confidence in the whole housing market and the wider economy. The result is a lack of activity in the US economy as people hold out to see what will happen in the immediate future.

This lack of confidence has spread to the UK and beyond. Housing transactions here are currently at their lowest level since records began, and the story in the mortgage market is even worse. Add to this the recent announcement of a rate of inflation that has now reached an 11-year high at 3.8 per cent, and there seem to be tough times ahead.

Against this backdrop, many people will feel it is best for them to hold on and ride out the storm, putting off moving until there are at least signs of a recovery in the economy. In more dire circumstances, families will be hoping food and fuel prices do not rise much further, or they may face problems meeting their mortgage payments.

We have outlined below some ways of making sure you are saving as much money as possible around the home and garden to bring those monthly bills down, and to open up the possibility of bringing in some more welcome cash. Some of these things we should already be doing in order to be as protective as possible to the environment around us but in times of economic stress, saving money takes on even more importance.

Save energy

It makes simple and logical sense that if we want to reduce our monthly outgoings, we should consume less, and energy is one of the resources that we waste most readily. On top of the unnecessary use of energy, it is one of the things that has gone up the most in the past 18 months. The price of gas alone has risen by some 15-20 per cent per cent since the start of this year, and is set to rise again in the future. The main cause of this has been the rise in wholesale price of natural gas by nearly 100 per cent over the past year, though the increasing profits of the gas suppliers in the UK have not attracted much sympathy from the public for their situation.

Even the simplest actions can save significant amounts of money - turning off lights that aren't being used cuts down on the energy being used, switching to energy saving bulbs means they use less electricity and last several times longer than traditional bulbs.

Heating around the home is another major user of energy, and making savings here is equally easy - turning down the thermostat in your home by just one degree Celsius, or switching the timer off 15 minutes earlier, saves around £40 per year, and you won't even notice the difference.

For even bigger savings on energy that is used to heat your property, consider installing loft insulation. Although this involves some work and cost, this can be recouped in a very short space of time through the savings on your heating bills. The Energy Saving Trust estimates that up to 15 per cent of the heating cost in a normal household escapes through an un-insulated roof - therefore, installing insulation can save around £155 per year, and if you fit it yourself, the costs can be recouped within a couple of years.

For those who feel the outlay of getting insulation installed at this time is too much to afford, there are a series of grants available to help out. Many of these come from the government and local authorities while others are available through your energy supplier and non-profit organisations, but make sure you check every avenue to get help with installing this and other energy-saving measures. Most electricity suppliers offer a limited supply of energy saving bulbs to their customers at some point or another throughout the year in promotional campaigns.

**Save water
This seems like more of an environmental consideration than a money-saving one, but with more of us on metered water supplies than ever before, every drop saved is more money in your pocket at the end of the quarter when the bills come in.

There are various ways of saving water around the home and the garden - some of which are easier to implement than others. For example, setting up a water butt to provide a supply of water to feed plants, flowers and lawns is a simple and efficient way of cutting down on the need to refill the watering can from the kitchen tap all the time. Not only is the rainwater the most natural way of feeding the plants, it is a great way of using the runoff from a shed or conservatory for the benefit of the whole garden.

Within the home, there are the traditional recommendations of only boiling as much water as you need to use, taking showers instead of baths, and making sure your toilet is fitted with one of the ‘dual flush' cisterns that use less water. Some recommendations go even further, like turning off the tap while you are brushing your teeth, instead of leaving it to run. Other methods of saving water include fitting flow meters to the pipes in your home, which regulate the water flow to a maximum, pre-determined level and save water efficiently.

**Add to your household
While the idea of becoming a landlord is for many the ideal way of earning an income without the nine-to-five grind, it has a number of implications from a tax, management and cost point of view. The fact is that being a landlord can often be like taking on a second job, and will take up lots more of your time than anticipated.

One solution to make the most of the space in your home and bring in some additional income is to take in a lodger. This seemingly old-fashioned system of renting out the spare room of your property is growing in popularity among both homeowners and tenants, and has taken on a decidedly modern twist.

Firstly, the financial side of things can be particularly beneficial. The government allows you to earn up to £4,250 per year without paying tax, through the rent-a-room scheme. This amounts to just over £350 per month, while the outlay for the landlord is usually minimal. If the room is in good repair, furnished with an adequate bed, wardrobe, desk and chair; there are few more costs that need to be incurred.

Legally, there will need to be a tenancy agreement in place to protect both you as the landlord and your lodger, but there are a number of websites which offer standardised legal documents such as this for the private individual. As with any arrangement of this type, take time to make sure you consider exactly who you are allowing into your home, and be sure to ask for proper references. As the situation is different to renting out a whole property to a tenant, you can lay down some quite detailed rules about what is allowed and what you expect.

There is also the opportunity to come to specific arrangements as to what you provide and what the lodger is able to use. Some landlords will agree to do laundry for an additional fee, as well as provide some meals; others will just provide the room and access to the bathroom to allow the lodger freedom to come and go as they please.

In today's business world, the concept of lodging has changed significantly. In larger cities, business people now often have family homes which are a significant distance away from their office, and require the flexibility of working early in the morning or late in the evening that the commute to the family home does not allow. This has led to some higher-level executives buying ‘crash pads' in the city and close to the office to use during the working week. Others prefer to lodge in the city centre during the week, returning to the family home at the weekend. This has spawned a new breed of ‘Monday-to-Friday' lodgers who rent a room during the week, and leave the property free for the owners to have to themselves for the weekend. This type of arrangement could offer the best of both worlds - added income to ease the pressure on the monthly bills, while keeping your home for yourself at the weekends.

**Grow your own
Gordon Brown has recently announced that one of the ways in which we in Britain should be trying to beat the credit crunch is to stop wasting so much of the food that we buy. While his comments attracted widespread derision, the vast majority of householders hate having to throw food away, and estimates suggest that each household wastes around £8 of food each week - something we can ill afford.

An even cheaper option is to make use of the space we have in the garden and grow fruit or vegetables ourselves. While it is unrealistic to expect to be able to grow blueberries and roquette in every back garden, even the most shaded and underused of patches of back yard can yield a small crop of tomatoes, support a chilli plant or supply a few lettuce leaves. Even a window box can provide the perfect environment for a fragrant herb garden.

Start off small, and take advice on the best crops to grow in your garden, but there are some ordinary homeowners who grow the majority of the vegetables and herbs they use in the kitchen in their own garden. In addition to the money saved in doing this, you will be getting organic produce that incurs no food miles getting to your table (depending on the size of your garden!), and the satisfaction of knowing that you are eating what you have grown yourself.

**Savers prosper
There is little property owners can do individually to improve economic conditions in the country, but by making a few small changes, they may be able to make significant differences to their property and to the health of their own finances. As the credit backlash threatens to continue and spread into other sectors and countries, the best-placed people will be the ones who have been able to cut their costs and make their money go further.

This also means that on the other side of the property price issues you will be in a position to be able to move quickly to take advantage of the rising market. Houses which are insulated, water and electrically efficient and have thriving vegetable gardens will be attractive to buyers, allowing a good future sale.


With thanks to BuyAssociation.