credit crunch

[dannyday5821]

what exactly is the credit crunch? why does it affect house prices?

[pug100]

Briefly over the past 5 years there has been a surplus of cheap credit on the world money markets.
This has led to lenders giving lots of cheap credit to people who may not in the past have paid it all back, including 100% mortgages to first time buyers. This is risky as it relies on the fact that house prices need to increase rapidly.
The credit crunch is basically that lenders are being more careful with whom they give the money. Hence the withdrawal of most of the 100% and 95% mortgages.
This means thet new buyers need to find 10% of the house price as a deposit. If the house is being bought at 150k a buyer will now have to find 15k to buy it.
More info here.

http://news.bbc.co.uk/1/hi/in_depth/business/2 007/creditcrunch/default.stm

[jno]

A mortgage is a form of credit. US banks lent mortgage money to a lot of unreliable ('subprime') people in the last year or two, and many of them found themselves unable to repay the debt. The banks had sold off a lot of the debt to other financial institutions (including British ones), and so many of these institutions have found themselves with much less money than they thought they had. So they've cut back on their mortgage lending. People can't borrow as much as they want to buy homes, so the homes aren't selling; so the sellers have to lower their prices.

Cheaper homes are good news for first-time buyers; but they may not be able to get mortgages as easily as a year ago.

[sp1814]

pug100 and jno are way off the mark.

Credit Crunch is a new breakfast cereal by Kellogs which contains toasted wheat, wholegrain, raisins and mortgage arrears.

It tastes awful.