Credit crunch
A credit crunch (or credit squeeze or credit crisis) is an economic state characterised mainly by a sharp drop in confidence and a lack of credit (or loans). At such times, usually brought on by a shortage of funds, financial organisations are less willing to lend money which can lead to a rapid economic slowdown. At any official rate of interest, credit becomes less available than it was previously.
Credit crunches frequently occur at the tail end of a recession and can also follow periods in which lenders are overly keen, even careless, when estimating customers’ creditworthiness. When such bad debts cannot be paid, losses are suffered by lending institutions and investors. Typically, such times will see lenders and investors retreating to less risky investments such as gold, silver and other precious metals.
The opposite of a credit crunch is ‘easy credit’ (or easy money or loose credit). These conditions usually involve easy-to-get, inexpensive loans that are a result of low interest rates for borrowers and relaxed lending policies by banks.
The term 'credit crunch' in the UK has become synonymous with the period following the 2007 financial crisis which followed a collapse in the sub-prime lending marked in the USA. A number of financial institutions had to be bailed out by governments, and the resulting debt, loss of confidence and withdrawal of credit dragged economies worldwide into recession.
The construction industry was particularly badly affected as finance became unavailable, investment was canceled and projects stalled.
Private sector housing and non-housing. Output/quarter (£millions 2005 prices) in Great Britain |
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Top 50 firms awarded 52bn of projects in the last year
New engineering data shows.
Enhancing construction site reporting efficiency
Through digitisation and the digital revolution.
Noise in the built environment
BSRIA guide TG 20/2021.
17,000 people suffer conditions as a result of exposure to excessive noise at work.
Turning down the noise: Auditory health
A pervasive risk with far-reaching consequences.
UK Construction Week, London is here !
Debuting major international pavilions and much more.
Getting the most out of heat pumps and heating
How heat pumps work and how they work best.
Plumbing and heating for successful retrofit and renovation
Low temperature underfloor systems and heat pumps.
Cost-of-living crisis and home improvement plans
Starting on the right footing and top tips for projects.
Delays on construction projects
Types, mitigation and the acceleration of works.
From Chaucer to Fawlty Towers.
Electrotechnical excellence, now open for entries.
Net zero electricity grids BSRIA guide NZG 5/2024
Outlining the changes needed to transition to net zero.
CIOB Global Student Challenge 2024
Universitas Indonesia wins for second year running.
ECA 2024 Apprentice of the Year Award
Entries open for submission until May 31.