It has been reported the credit crunch seen in the markets has resulted in £110 billion being wiped off the value of leading shares since Wednesday, 8 August. Markets around the world are mirroring the problems in the American non-conforming market, which could see a potential $300 billion worth of loans at risk.
The European Central Bank injected £214 billion in three days after the crisis hit global markets in order to help ease the credit market and bail out banks unable to acquire financing on the open market.
The cash boost was echoed by the US Federal Reserve injection of over $2 billion along with the Bank of Japan helping out with 600 billion yen.
Jonathan Cornell, technical director at Hamptons International, said: “I think this problem will have a bit more in it. The trouble is we don’t know how some things will play out – a lot of mortgage debt is packaged up with other things than mortgages and investors have bought it without necessarily knowing this.
“However, the global fundamentals are quite good. This is a temporary correction that will cause pain and instability for a few more months. The problem is that banks are not lending to each other, so pushing up the cost of funding and central banks are having to step in. Once investors remember that UK mortgage lending is good then people will be happy to buy UK mortgage books.”
