Hey guys,

I read an article this morning called "Banks told to predict effects of a 40% crash in house prices" which was on Times Online.

It begins with the headline "40% crash in house prices" but ends the article with:

The FSA move came as UK house prices grew at their fastest for four years, according to new figures from RICS.

But, if you actually read the article, you realise that it is simply about the FSA (Financial Services Authority) who regulate the banking and finance industry telling banks to be more stringent in their criteria of testing the effects of various scenarios that could potentially happen in the economy.

>>> The article continues below <<<

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The question I pose to you is "What would happen to YOU, if the market dropped by 40%?"

Consider the following:

• If interest rates increased by 2%, what would your cashflow look like? How would you survive?
• If housing prices decreased by 40% and you couldn't remortgage for 5 years? How would you survive?

And one of my favourites:

• If you lost your job and couldn't earn an income for 3 months? What would be the effect of that?

This is what I call a "worst case" scenario. Do I think that it will happen? I personally don't. I always work on a "realistic worst case" scenario but that doesn't mean that I don't consider all of the scenarios and options.

If you are unsure how to run through all of these numbers, you should first make sure your portfolio is up to date in Ezytrac, and then give us a call and together we can work out exactly what the impact could be.

Live with passion,

Brett Wood

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