Mortgage Concerns Trouble US Market
Aug 10th, 2007 @ 9:37 AM by Alden Smith
The sub prime market is taking a huge bite out of the world’s finances. Sub-prime loans are loans that are made to people with less than perfect credit scores. World-wide, this trend has put a lot of investors in deep trouble. This trend will not only hurt the world market, but will make it even harder for people with good credit to secure a loan.
What the Central Banks Are Doing
In the banking industry world wide, banks are starting to charge higher interest rates for loans that they make to other banks, indicating that they look to limit their risks.
World banks are not taking this situation lightly. Central banks are moving to prop up the market by injecting cash into the system to shore up banks that may be in difficulty. The European Central Bank has put cash into the money market for the second day since the news hit the streets. Today, Friday August 10th, they put 61.05 ban euros into euro zone money markets. Japan’s central bank also pumped one trillion yen into the system to boost liquidity.
The Effect on the Stock Market
At the open of the market today, the Dow Jones was down 387.18 points. The market has been volatile lately, setting record highs, but this latest threat will certainly affect the Dow in ways not good for investors.
BNP Paribas one of the main banks in Europe and France, has closed down three investment funds due to this unstable market condition.
How Does This Affect You?
Falls in the market impact everyone. From investors to pensioners, a great deal of economic worth is tied into the stock market. It can lead to recession if allowed to stay out of control. It impacts the economy because large companies will freeze hiring practices. Wealthy individuals will cut back on expense and ride it out. Large companies will take a closer look at pension schemes, and the end results are everyone in one way or another suffers.
What Can Be Done?
Banks will certainly take a different view of sub prime lending. The evening news is filled with stories of people walking away from mortgages they cannot pay, leaving the lending institutions holding the bag. A real disaster of sub prime lending is the people with good credit now will struggle to find a mortgage lender willing to look at their loan application.
Common sense dictates that the lenders insure that a person can handle the loan if he applies for it. Obviously, the sub-prime market has been lucrative. It is now rearing its ugly head and making it difficult for every one. We need to take a wait and see attitude. It is the only thing we really can do…
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http://www.zolaenterprises.com has been doing articles on this. Seems their page was down today and is back up. They have been warning the us in alerts that we are heading for trouble for awhile now.
They have an alert section on the news and video websites section for articles and alerts. I think this is not so shocking when you have been keeping up with their world news. It however is pretty scary.
I do not have a site so I put theirs as my link to show what I am talking about.