Monday, November 18, 2019

Effects of the credit crunch in terms of regeneration and redundancies Literature review

Effects of the credit crunch in terms of regeneration and redundancies - Literature review Example This paper endeavors to understand the appropriate meaning of the term credit crunch, prior discussing initiation and implications of the same in the United Kingdom, specifically in Sunderland. Credit crunch is a situation when lenders stop lending, borrowers fail to borrow, builders cease their activities and buyers are forced to exhibit their inability to buy. In specific manner, credit crunch can be defined as a sudden stoppage in availability of credits as well as loans, causing shortage of liquidity in the market. Since 2008, such a situation has resulted in development of a complex set of issues in various countries that is continuously worsening. According to Erkens, Hung and Matos, the present credit crunch was initiated in 2007 in the United States, when lenders were heavily exposed to mortgages worth billion dollars, which turned into bad debts. The authors further added that the viability of the subprime loans related to mortgage has a significant impact on the global fina ncial system. Consequently, banks and other financial systems were no more interested to lend to borrowers, which created a chain reaction reaching national financial system of various nations. By the end of 2008-09, the housing bubble in the United States (US) busted and resulted in collapse of several prominent banks. Interest rates also increased significantly during this period. According to Parkinson, the trend had followed in the property as well as construction industry, bringing about a drastic impact on regeneration.

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