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Is the UK is set for a sub-prime mortgage crash?

The survey which we highlighted by housing charity Shelter seems to indicate that the UK sub-prime mortgage sector is under serious pressure. There are expectations of around 40,000 housing repossessions in the first six months of 2009 with the potential for this figure to mushroom if the UK economy, as expected, takes a further lurch downwards. So is the UK set for a US style sub-prime mortgage crash?

There is no doubt that mortgage companies are fearing the worst, especially those with exposure to the sub-prime market, although the sector is nowhere near the size of that in the US. There has been little headline news regarding sub-prime mortgage crashes in the UK as yet although we could see a serious shakeup, and potential debts for financial institutions increase substantially, over the coming months.

It will be interesting to see how the government reacts to this new survey and whether they look to pump extra tax payer's money into the sub-prime mortgage sector, or concentrate on the wider market. The announcement that the UK government will be introducing quantitative easing in the short term does offer the potential to increase funding to the UK economy but this will come at a price.

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