Credit Crunch Confusion?
28-11-2008
So by now I guess you’ve heard of the credit crunch, but why is there a credit crunch in the first place? Where did the crunch begin and whose fault is it anyway?Here’s some bite size explanations…
Photo From; Google
- It all began earlier than most people think; actually it started developing at the beginning of the millennium when US interest rates had been attacked and going down a reaction to the dot.com crisis and the attack on New York.
- Sub-prime borrowers became eager to take advantage of rare low rates, grabbing any money that happened top be on offer.
- Debt levels eventually went back to ‘normality’, however it became incredibly more costly to service. This put pressure on both the borrowers and lenders alike, paying for each others expensive mistakes.
- This crisis had tried stay within the US housing market; this was until lenders had made the decision to package staggering amounts of debt and sold them on.
- The actions taken by the lenders and the further approval of ratings agencies, resulted in the credit crunch spreading further a field. Soon enough the credit crunch had grown global.
- Whole sale sources of finance evaporated due to general uncertainty, operators became more aware of the negative results lending could cause; keeping a tighter grip on their money.
- In the second half of last year, the Credit crunch first began to slowly cause mayhem in the UK.
