It's pretty hard to avoid the panic and the pandemonium that has come out of the world finance markets as a result of the credit crunch. Journalists and analysts have spelt out the end of the world because of it, household names like Northern Rock have been brought to their knees because of it and subprime lending has become all the harder because of it. But what does it mean to you? Well it's a case of simply - understanding how subprime mortgages have such an impact on everything we do and then finding out how you can avoid the problems that are on the horizon.

The Subprime Crisis In Simple Terms...

In a nutshell, lenders in the USA lent too many mortgages to too many people who could not afford them. House prices rocketed because of the influx of mortgages, and out of this mess defaults and arrears grew.

All over the world investors like Northern Rock, who had bought lots of these mortgage deals from the original lenders, realised they were set to lose a lot of money as a result of the mortgages failing. Now lenders on both sides of the Atlantic have lost billions, and the Governments of the world have bailed them out. This means they have learnt the hard way, so never again will mortgages and credit come quite so easy to quite so many.

Credit Crunched...

So credit has gone from something that was easy to attain by just about anyone to something that is now a precious commodity - lenders are nursing bruises and will only lend to sure-fire customers. Rates have gone through the roof and lending criteria have tightened - it's a crash of lending caused by the massive rise in defaults and arrears in the USA.

How Your Life in the UK Will Be Affected...

So what about us in the UK, why are we in trouble? Well, we are in trouble because many of our lenders invested in or are owned by American financial institutions - our mortgage lenders, banks and credit companies earned their money in the US subprime mortgage market. Buying up 'books' of mortgages that were rated as safe and profitable, when really they were anything but. Now our lenders are paying the price because they lost so much so quickly.

The fall in the US without doubt will affect your UK borrowing now and in the future. If you have been turned down for a loan recently, the crisis in US probably explains it. If you are having trouble finding a cheap mortgage, well you can again look to the crisis in US as the cause. The US subprime crisis has already hit every part of UK financial life.

What To Do Next...

It's time to take stock - these problems are reason why you will have trouble getting subprime deals from here on in, now it is prudent to decide what to do if you cannot get these loans. Maybe reorganise your finances to see where you can save that little bit extra, or even consider a cheaper remortgage rather than a completely new loan. Talk to a professional mortgage adviser and see if they can help you find ways to avoid subprime lending - an advisers' knowledge of lenders may be the difference between finding a mortgage deal or not finding one at all.

One thing for sure, it's going to be a rocky road for all subprime lenders and borrowers for some time to come.