For the last 15 years, the sun’s been shining on UK property. But now? Well, it feels like we’ve been hit by a hurricane. Kirstie Allsopp and Phil Spencer find out exactly what the credit crunch means – and take a good look at the real picture of house prices around the country.
The Oxford English Dictionary defines “Credit Crunch” as a severe shortage of money or credit. Banks have cut back on their lending - and for the property market, that means mortgage approvals have plummeted. In fact they’re down more than 57 per cent on last year. In the UK, there’s around three and a half trillion pounds tied up in property. But if no one can buy, that money is meaningless.
The credit crunch began in August last year, when we all had to learn a new phrase: sub-prime. This all started with some high risk lending in America - to those on low incomes and even with no income at all. American banks took on a lot of ugly looking debt and then sold it onto other banks around the world. Almost overnight, the world’s banks changed the way they did business. They stopped lending to one another - and that meant they stopped lending to us.
By April of this year, most homeowners’ worst fears were realised. It was reported that house prices had started to fall. Both Halifax and Nationwide reported a 1 per cent drop in the value of an average home between April 2007 and April 2008. This is equivalent to around thirty five billion pounds evaporating into thin air.
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