The Credit Crunch, how I hate that spin. This is a good old fashioned insolvency issue and the banks, namely HBOS/ Hailfax , RBS  and Northern Rock(at the moment) are insolvent. The reasons that they are insolvent are complex and multi layered, but simply put, the assets of the customers that the  lending is secured against are overvalued and the banks  when marking the assets to a sinking market have a lot of new and growing number of  SUB PRIME LOANS on their books.
A big portion of those loans are in the UK housing Market which is 30% - 60% over valued. Markets tend to over compensate, so

"Some men see things as they are and say why - I dream things that never were and say why not."

[video:http://uk.youtube.com/watch?v=FFsMCXXAWI0

An old one you might not have seen before