US subprime mortgage lenders are struggling to survive, and their decline is having a significant impact on global financial markets. In London, the FTSE has seen a series of sharp declines that on Friday, August 10th, suffered the largest drop in seven years in a single day and wiped out most of this year’s gains, the US market crash repeats itself here in Great Britain. The increase in defaults and defaults on subprime borrowers in the United States has led to a reassessment of the value of such holdings by investment bankers who have bought large stocks for risk.
The potential paper value of your investments disappears practically overnight as US house prices collapse, triggering panic and consolidation attempts at roughly equal proportions. It is generally given to those who cannot prove their income or have poor credit history, or maybe even both. In exchange for higher interest rates from borrowers, lenders are willing to take the risk of these types of bad loans. increase the risk is minimal because if the borrower defaults, the lender has a fee on the property and can therefore force the property to be sold by getting back the initial investment, interest owed and collection costs. Falling, as is the case in the United States, can lower the value of the property below the outstanding liability, causing the lender to incur a significant loss.
Since subprime lenders in the US are the least able to absorb defaults, with most of their borrowers getting 100% mortgage, they are more likely to collapse if everything goes wrong. Last year alone. It is now being investigated by federal investigators to see if there have been any irregularities in its business practices. It is bad debts from lenders like New Century that is causing the extreme nervousness in financial markets around the world, leaving analysts wondering whether the situation will repeat itself in the UK. This has led many UK lenders to rate their riskiest loans to determine their risk and ensure they have an adequate amount of capital to cover potential losses. Be less susceptible to sub-prime lending than the US market Also, as long as UK house prices continue to rise or remain stable, lenders have not made bad loans to homeowners are not affected.
Any threats will materialize when UK home values fall as real estate equity will fall too, and this could lead to the financial chaos seen in the US.