With high apprehensions of a global credit crunch, Bank of England has been approached by many high street banks for emergency loans to the tune of 23 billion pounds. This has resulted in the loss of 14 billion pounds by the shares in the banks pushing FTSE 100 index to close at its lowest level in the past two and half years. It is said that the urgent rescue of Bear Stearns, the fifth biggest bank of US competitor which was earlier broken up by JP Morgan for 240 million dollars is the main reason behind the falling of shares in the banks. Bear Stearns sell-off had raised fear among investors that the exposed US recession could also bring down any British bank and this has worsened the situation further.

The credit crunch has resulted in bitter relationship between banks that are very reluctant to lend each other and this has largely affected the mortgage industry. Banks heavily depend on cash transfer to finance the loans of their customers. With the drying up of these types of loans, mortgage deals have become impracticable in the recent years. The Bear Stearns bailout has further cautioned global banks and they are indisposed to lend each other fearing an imminent collapse. The US dollar crisis has also damaged the confidence in property industry showing signals of further price falls. The problems may turn from bad to worse and lenders would cut back their offer of loan size if the price reduction takes place.

Now the situation forces the public to depend on their savings or a deposit of 25% of property value would make them eligible for a first time mortgage. The non-availability of mortgages may make purchasing a house impractical and this may also force the sellers to accept lower prices or withdraw their property from the market during the last minute. People who want to buy even a one bedroom apartment for the first time will feel the crunch as getting their accommodation may go beyond their reach.

Many economists suggest that people should avoid unnecessary selling and if they have to sell then the property can be marked at 10% less than its original value to get more interest. First time buyers can restrain themselves from buying till the situation improves and they can indulge in hard negotiations and cheap bargains of property auctions. The home buyers who want to remortgage their property may not also find an affordable home loan deal due to the credit crunch. Though the housing market usually springs at the time of Easter weekend, today only fearless investors who are able to take calculated risks are investing their money in the market. Many feel that only when the banks stop worrying about the cost of bread and focus on the banking system the situation will improve.