Wake up call for investors

• Shares fall - US S&P index experienced its worst fall since Sept 2002 due to credit market concerns and FTSE saw this year's gains wiped out
   
• Leveraged buy-out bubble seems to have burst - banks having to pull out of Chrysler and Alliance Boots deals
   
• Expanding crisis in US mortgage markets - one of the biggest US lenders saying the problems are spilling over into conventional loans
   
• A flight to safety saw US government bonds indicating that investors are re-assessing risk
   
• Global market liquidity starting to reduce as investors unwind the Yen carry trade (where people borrow in a low currency and buy higher yielding dollar assets

Read full article (FT.com)

Comment:
The crisis in the US subprime mortgage market could well be echoed in the UK. In the last 2-3 years some UK mortgage lenders have been very relaxed about their lending and a few have even lent on 6 times earnings. Also many UK borrowers will see the expiry of their fixed rate terms and will have to re-mortgage at a higher rate. The warning signs that the UK housing bubble may burst are clear to see - view out warning signs article.

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