Mortgage lending is likely to dry up next year. That's the stark warning from the industry. So what exactly will it mean for borrowers and who will be worst affected? This is Money Editor Andrew Oxlade sets out what he expects in the mortgage crisis of 2008...
Bad news has not exactly been in short supply in recent months with the sub prime crisis and the credit crunch it caused continuing to impact on British banks, most notably Northern Rock.
But today British borrowers, who have been watching the fallout of the global credit crisis with a mix of fear and bemusement so far, have been given warning of the looming 'perfect storm' that will affect their lives and finances more directly in 2008.
The International Monetary Fund yesterday warned surging oil prices and the turbulence on financial markets caused by the credit crunch might bring a 'big reduction in international trade from which no one would be immune'. Grim stuff.
It then got worse with the UK's Council of Mortgage Lenders warning of a lack of money available to fund mortgage markets 'if capital markets do not open next year'.
And then today, the UK's largest building society warned house prices fell in November at their fastest pace in 12 years.
Could it get worse? Yes. The Bank of England then warned of a slump in new mortgages - from 102,000 in September to 88,000 in October - and its governor Mervyn King told MPs on the Treasury select committee that getting a mortgage could become more difficult: 'I'm sure lenders will feel more constrained in their ability to fund mortgage lending.'
The consumer has witnessed some pretty gloomy warnings in recent months, but nothing so clearly defined and repeated in so many quarters as it has been this week. Quite simply, mortgage costs are set to soar for all.
Because of the credit crisis, banks are simply not lending to each other as none know exactly how badly the others are exposed to subprime borrowing in the US.
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