Recession tracker

The average price of a home in the UK peaked in late 2007, then plunged rapidly in 2008 before recovering to a degree in 2009.

The housing market was the first area to be affected by the credit crunch as banks curtailed their lending, making it more difficult for buyers to get a mortgage.

Year-on-year % change in house prices
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Source: Land Registry

The whole financial crisis had started in the US housing market where banks had lent money to "sub-prime" borrowers.

When these borrowers defaulted on their mortgages in large numbers, the banks were left with bad debts - many of which had been packaged up and sold on to other financial institutions.

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This infected the entire financial system and meant that banks stopped lending to each other - creating the credit crunch.

The first UK bank to be affected by the seizing up of financial markets was Northern Rock, which had to be rescued by the British government.

A lack of mortgages meant the market started to stagnate and the properties that did change hands went for less than they would have done a few months previously.

Some home owners who have taken out mortgages with a high loan-to-value ratio or borrowed extra money against the value of their houses are facing the prospect of negative equity.

Prices rose steadily in 2009, but many commentators indicated this was the result of a shortage of properties for sale when demand was climbing. Most say there will be no swift return to a housing boom.