Stand by for a British subprime crunch

Although fewer UK mortgage buyers are considered risky compared with the US, many are in for a shock as the market corrects here.

Unless you've spent August on a desert island, you'll know about the subprime mortgage crisis in the US. What started off as a problem in an obscure corner of the US housing market has spiralled into a housing and credit market slump that may pose the greatest threat to the financial system since the 1998 crash of the Long-Term Capital Management hedge fund. Rising interest rates and dodgy lending practices have hurried along a housing slump and may even lead to a US recession. Numbers out this week showed that the S&P/Case Shiller US National Home Price Index fell 3.2% last quarter from the same period a year earlier. That's the worst number since the index was created in 1987. Of the 20 cities included in the survey, 15 saw a price fall. That's not good news for US home owners, particularly as the data only runs up to the end of July before the subprime crisis really kicked off.

Only a few months ago, the American authorities were talking of the problem being contained', and claiming the housing market bottoming out'. It clearly hasn't. We would do well to learn from this complacency. Here in the UK, commentators claim that we have no significant subprime problems and that a similar crash couldn't happen here. We think they are wrong. It could and it probably will. Here's why.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.