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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

7 Aug 2008

Credit Crunch Latest

In the UK, Bank of England interest rates have been kept down at 5% it has been announced today, with many believing that there will be no rise in rates this year. However prices continue to rise driven mainly by rising fuel costs. Even without a change in the rate, it is widely believed that mortgage lenders will compete for business by lowering their rates. Nationwide have recently announced cuts, others including Lloyds TSB have already dropped their rates. In America, the US Federal Reserve is holding rates down at 2% for the foreseeable future in an attempt to encourage an economic up-turn.

At the same time, there are new figures on the slowdown of the housing market with a drop of more than 1.5% in house prices for the fourth month in a row. Prices still remain significantly higher than they were 5 or 6 years ago, and not many home owners are currently staring negative equity in the face. Some areas in the US have seen prices drop around 25 to 30% in the last 12 months, but when you look at the graph above, you can see the familiar pattern of boom and bust being repeated. The 'booms' are ever higher, but the 'bust' part of the curve never drops lower than the previous low... If we repeat the previous patterns, we end up with a real 'slump' in the market by about 2010-2011, but there is no guarantee that this current slump will follow previous patterns.

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