The week the crisis hit home

Level 2 Intermediate

1 Warmer: Borrow and lend

a) Try to explain the difference between borrow and lend.

Tip: It might help to draw a picture and translate the words into your own language.

b) In pairs, offer to lend someone something, and ask to borrow something. Then explain to a third person
what you said and did.

Credit crunch: A shortage of available loans. This could simply mean a rise in interest rates, but
it often means that some borrowers cannot get loans at all.

2 Key words and phrases

Match the words or phrases with their meanings.

pull a deal consumer statistics overdraft loan

interestrate mortgage ination recession negativeequity

1. A legal agreement in which you borrow money from a bank to buy a house. Repayments are usually made
monthly. ___________________

2. To remove an offer from the market. ___________________

3. A situation in which your house has lost value and is now worth less than the amount you are paying for it.
_____________________

4. A period when trade and industry are not successful and there is a lot of unemployment. _________________

5. Someone who buys and uses goods and services. ___________________

6. Amount of money that a person, business or country borrows, especially from a bank. __________________

7. An agreement with your bank that allows you to spend money when you have no money left in your account.
___________________

8. The percentage that an institution such as a bank charges or pays you when you borrow money from it or keep
money in an account. ___________________

9. A group of numbers that represent facts or describe a situation. ___________________

10. An economic process in which prices increase so that money becomes less valuable. ___________________

Source: Macmillan English Dictionary Online

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The week the crisis hit home
Level 2 Intermediate
The week the crisis hit home
Graeme Wearden
April 3, 2008
Introduction
1 Mortgage rates soar as lenders pull their deals!
Millions face nightmare of negative equity! US
recession a possibility, says top banker!
2 Over the last few days, the British people have
been hearing a lot of bad news about the current
nancialcrisisandforecastsforthefuturedonot
look good.
3 Consumer borrowing is rising at a time when
banks are dropping their best mortgage deals.
Economists warn that many people could be
headingfornancialdisaster.
4 The Federal Reserve chairman Ben Bernankes
warning that the US could slip into recession,
which would have drastic consequences for the
world economy, has added to the bad news.
Credit
5 The Bank of England has reported that consumer
borrowingisgrowingatitsfastestrateforve
years. The money lent via loans, overdrafts and
credit cards jumped by a total of 2.35bn
in February.
6 Economists fear that many people are borrowing
money to cover essential costs such as the
monthly mortgage bill. A similar situation
happened across the Atlantic last year when the
US economy began to have problems.
Mortgages
7 The news on mortgages is getting worse day by
day, with hundreds of deals being pulled every
week. One of the reasons behind the panic is the
credit crunch, which has forced banks to hang on
to cash and not lend money to everyone.
8 BankofEnglandguresshowthattheamountof
newmortgageshasdroppedto73,000amonth
half as many as a year ago.
9 Research suggests the average rate on a two-
yearxedratemortgagehasrisenfrom6.15%
Macmillan Publishers Ltd 2008
NEWS LESSONS / The week the crisis hit home / Intermediate
to6.29%overthelasttwoweeksaddingupto
160 to the annual cost of a 150,000 mortgage.
10 This is despite the recent cuts in interest rates,
which lenders are not passing on to
their customers.
The housing market
11 Negative equity threat to 3 million homes was
the headline in a recent edition of the Daily
Mail. But Labour politicians do not believe that
the current problems will lead to a repeat of the
recessionoftheearly1990s.However,ofcial
statistics show a different picture.
12 In parliament, Liberal Democrat, Vince Cable,
warnedthata10%dropinhousepriceswould
leave 3 million households with negative equity.
13 Government Minister Angela Eagle was quick to
disagree. Prices, though, have fallen for the last
vemonths,andeconomistswarnthatalarger
drop in prices becomes more likely as soon as
peopleexpectittohappen.
The economy
14 The chancellor, Alistair Darling, insists the UK
economywillstillexpandthisyear.
15 News that growth in the key service sector
is slowing is putting pressure on the Bank of
England to cut interest rates.
16 The picture in the US is unclear, and Ben
Bernanke warned that the worlds largest
economycouldshrinkinthersthalfof2008.
Further bad news
17 Oil is still trading over $100 a barrel which
indicates that petrol prices will stay at their
current level of about a pound a litre.
18 Foodinationissoaring.Thecostofmilk,bread
and sugar has been going up for many months.
The latest food to come under pressure is rice
theUNhaswarnedthat36countriescouldrun
short of essential food stocks.
Guardian News & Media 2008
First published in The Guardian, 03/04/08
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The week the crisis hit home
Level 2 Intermediate

3 Comprehension check

According to the article, are these sentences True (T) or False (F)? Correct any false sentences.

1. Mortgage rates are remaining steady.

2. It is becoming impossible to get a new mortgage deal.
3. Many people in Britain are having to borrow more money to pay for their homes.
4. Some banks are stockpiling cash.
5. House prices in Britain are likely to remain steady.
6. Petrol prices are likely to go up dramatically.
7. The US economy is going to stay very strong.
8. Interest rates in the UK have risen.

4 Vocabulary: Describing trends

Drawarrows(upward,downwardorsteady)nexttothesephrasesfromthetexttoshowwhatkindof
trend they describe.

1. Mortgage rates soar

2. Consumer borrowing is rising
3. The US could slip into recession
4. Consumer borrowing is growing
5. The amount of new mortgages has dropped
6. Prices have fallen
7. TheUKeconomywillstillexpand
8. The worlds largest economy could shrink
9. Petrol prices will stay at their current level
10. The cost of milk, bread and sugar has been going up
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NEWS LESSONS / The week the crisis hit home / Intermediate

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The week the crisis hit home
Level 2 Intermediate

5 Discussion: Giving advice

Discuss in groups what advice you would give people to help them avoid or survive the credit crunch.
Then role play the situation.

Use these sentence beginnings:

If I were you, I would...

Why dont you...
Its probably not a good idea to...
You could...
Have you thought of...

6 Webquest

Skimreadthefollowingarticletodiscoverwhatadvicesomenancialprofessionalsaregiving.Isthe
advice similartoyoursinquestion5?

http://www.guardian.co.uk/money/2008/apr/13/consumeraffairs.householdbills

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NEWS LESSONS / The week the crisis hit home / Intermediate

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