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nance Englishh
Credit crunch
Credit cru
unch = when
n borrowingg money beccomes hardeer to get andd more expensive.

In the present credit crisis,

c bankss stopped lennding to oth
her banks, th
hen stoppedd lending to their
customers, which mean ns that theree is now a sh
hortage of credit
c and no
n more cheeap credit.

Economic terms

The Centraal Banks an nd Finance ministers are

a trying to
o decide wheether to injeect more mo
oney into
the financiial marketss.

Manny people no ow believe thhat we are now

n headingg towards a downturn
/ recession / depression
d / financial crisis. Aparrt from the credit
nch, there arre other sign
ns that our economy migght slide into
recession, such as rising innflation and an increaseed cost of living. The
goveernment maay respond by b cutting in nterest ratees / bringin
ng down
the rate of inflaation.

To compound
c the miseryy falling hou
use prices m
mean some home
ners face neg
gative equity.

Oveerall, the foreecast is pesssimistic or gloomy.

Perrsonal finaances

Hig gh street baanks lend money

m to customers in tthe form of loans or in
the form off mortgages to buy houuses.
Sub primee mortgages,, now often referred to as toxic mo ortgages, were
w sold to p people with poor
credit ratin
ngs. It is a combination
c n of this typee of risky leending, falliing house prrices and higgh interest
rates whichh led to defaaults on mo ortgage paymments and fo oreclosures//repossessiions. This in n turn
triggered th
he global fin
nancial crisis.

A number of banks havve already gone

g bust or
o have beenn nationalized/bought by the goveernment
who try to reassure cusstomers thatt their savin
ngs accountts are safe. In
I the UK, tthe governm
ment has
announcedd that all saviings accounts are guarannteed up to a threshold of £50,000.. However, consumer
confidencee is low.

English materialls by Veronica Gilhooly © Le

earnwell Oy 2008 Finance
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