This is for all those people with bad credit, looking to buy or have bought a home, or are investors, or people just interested. How do you think this subprime issue is being handled? How long do you think it will last? Any predictions as to how it can/will be fixed? If you don't know, subprime mortgages are loans made to people with less ideal credit ratings with higher interest rates. Recently, people have been falling behind on their payments, and loaners have been struck with massive losses and some of the largest are liquidating and preparing for bankruptcy. This has put intense pressure on investors, which explains the massive volatility in the stock markets recently as people are afraid that the lack of loaning money and loaners will mean harder credit, leading to less mergers and acquisitions which help push shares up. A basic breakdown the way I see it: For American markets: Subprime = unpaid debts to loaners = closure of loaners and less money to loan = harder credit = less money to borrow to invest/merge/takeover For the rest of the world: Americans are the one of, if not the biggest consumer of services, commodities, and products -> Americans don't like saving -> Americans tend to buy a lot of things with credit -> harder credit = less spending (buying of products) = less importing of global products = less exporting of products = fall in economy = bad for stocks Currently, the Federal Reserve (of USA) has kept its interest rate the same and it won't be at least until September before they change it if they do. Many treasuries jittery over inflation (like the US) are also speculated to keep interest rates as they are if not raise them. A lowering of interest rates would help create more spending (good for economy) and make loans easier to access. Various banks/loaners are announcing heavy losses etc. The US Federal Reserve, Bank of Canada, and European Central Bank (amongst others) have injected hundreds of billions in loans to help out banks. Many others have pledged to do the same if the need arises. This has increased worries that the subprime meltdown is not just contained to the US, again, causing global stock markets to decline. This isn't just affected investors, but thousands if not millions of homeowners as well, as they are probably going to lose their homes due to this massive meltdown. Mortgage companies may repossess the homes, but who could they sell it to if there is no credit available? Surely, most Americans do not have hundreds of thousands of dollars on standby.
This has been coming for a long time, and as much as it is bad news for everyone, especially the banks, it is their own fault (the banks) for lending to people who can't afford it (and it is equally their fault (the borrowers) for taking a loan for more than they can afford). Like you say when the repossessions start, there will be very few people able to buy those homes, as the banks will be very wary of lending to anyone who isn't a dead cert. So I guess the housing market then drops like the proverbial tonne of bricks...
Bad debt is going to be a major problem for people, ok its bad to say it but it is there own fault, not to mention the banks, no doubt when the bubble bursts in the UK, the Goverment will step in and help out those in need, which of course means spending more of the hardworkers tax payers money. But I cant wait, means I can clean up when the repossession come in Is that bad thing, making money of other peoples misery? Regards GiGo PS nice to see some serious discussion about something on here
Exactly what I was thinking! It'll be great for anyone who has the means to buy after the crash. Re money from misery: isn't that one of life's unfortunate realities? We've been enjoying free banking for years in the UK due to the banks making massive profits off the backs of the less fortunate who get stung with ridiculous bank charges for late payments etc. That has been in the news recently
And none too soon. House prices are just silly in the UK, and apparently the market is overvalued by 20%. I'm a home owner, but I'll happily lose some equity if that means the less affluent parts of society can actually afford a roof over their heads.
Indeed, house prices are absolutely insane down here especially. 300k gets you a crummy 3 bedroom semi detached thing built in the 80s. ... £300,000 ! That's $608,000 US.
Nah, London doesn't have any grass That's Bracknell of all places - shows you how bad the prices have gotten.
The southeast is also overly expensive, and i remember reading that house prises are rising again. Sam
Here's some info I used for my GCSE Geography coursework. More reasonable than London, especially when you consider it's a nice, fairly upmarket commuter village. low levels of pollution, high quality of living, and all that.
London does have grass!! Our house has a front lawn and the rear has a huge garden, and past that there is a huge allotments with a footie pitch and Amish church of all things. Its weird that how houses have become sooooo expensive in a short amount of time. When we bought our house roughly 15yrs ago my parents bought it for £115K and that was alot in those days, but considering our road/location and area it was worth it in the end. A few years back our house was valued at £300K which is silly considering its a Semi With garden and garage but all consists of decent sized areas. My parents did add a front patio and added stuffs like double glazing/alarm/extras...etc and so recently it was valued at half mill(£). Funny thing is that our story docent end there, my parents have already paid half for the extension to the back end of our house next year. Given the investment im pretty sure it will add another £100K to the value or more. But you know what the best thing is?......... Theres no mortgage! hahahahahahahahahahaha. My dad's ace.
Well, everything is more expensive in the UK. Something I've heard about housing costs is that if it drops, it will be the biggest drop since the Great Depression. The worry about subprime is not just housing, but an overall economy. Shares are falling despite record earning reports by companies.
They pumped more? Last time I checked, it was $28b. the ECB has stated it would pump an 'unlimited' amount if needed.
I'm not an economist but wouldn't pumping an 'unlimited' amount of $ into the economy of America move the value of the dollar from the basement to the core of the Earth?
Well, money is finite. I think what the Fed meant was they wouldn't stop pumping money in until the issue starts to fix itself. But yes, pumping in reserve money into the economy would probably devalue the dollar a bit. I think what they are trying to do is loan money to banks so they can try to correct themselves. The money will eventually have to be returned (with interest, of course). Think of it as using a credit card to pay a credit card bill, only on a billion or even trillion dollar scale.
It's a pretty sad monetary policy. Investment Bankers and the Wall Street types don't really worry about investing in risky ventures as much because if something goes wrong they count on the Fed to step in and drop interest rates or loan money to keep the markets from falling too fast instead of simply letting people lose some money. If everyone took a hit on this subprime fiasco then lenders would be less likely to give money to people who have no hope of repaying it (seriously 45 year morgages??) and there wouldn't be an overinvestement in the that market.
