Property finance is the general term used to describe the specific asset funding requirements of property.

There are four different scenarios where property funding solutions would be relevant. They are:

• Purchase business premises
• Create a buy-to-let portfolio
• Property development
• Non Status Property Loans

With the growth of the property development sector and more and more people getting involved in the buy-to-let market the number of institutions offering this type of finance has increased. In a buoyant property market rising house prises have provided ample security against these loans and money has been easy to find.

However the "credit crunch" caused by the US subprime market has made it harder to secure funding in the property sector. Many UK banks have already been adversely affected. Perhaps none more spectacularly than Northern Rock however they are by no means the only casualty. Big High Street banks, all with huge commercial lending divisions have been forced to write off billions in lost revenue as a consequence of subprime investments. Subprime is as the name suggests - loans to people who are not prime candidates for funding. These people would not typically be given a loan because of their personal situation however when property prices started to rise the lenders believed that the increased risk was offset by the underlying asset. As a result millions of loans were approved for people that really couldn't afford them.

Those subprime mortgages were then bundled together and on-sold to other financial institutions such as hedge funds or pension funds with the original bank taking a smaller profit but off-loading the risk. The subprime mortgage market was consequently a highly profitable sector, until property prises levelled off, interest rates increased and loans started to default in large numbers. As a result the banks that have all profited from inter-bank lending have been badly affected and no one knows just how bad it's going to get but the effects are already being felt on the UK high street. Money of any sort from credit card to personal loan to property finance is becoming harder to get as the banks baton down the hatches to see what will happen.