Recently the economy for theUnited Stateshas started to go in a long predicted recession. This recession is mainly due the hyper activity taking place in the mortgage sector of the economy. The recession has come about mostly because of the haphazard investment of the financial institutions as well as the country on subprime mortgages and unreliable customers.
The lending in the economy was great however the increase in mortgages and the limited resources of the people have created a global credit crunch. This is also affecting the UK economy; bringing it down into a recession as well. “The problem with subprime mortgages is that many homeowners are coming to the end of their ‘introductory period’ In this introductory period, the mortgage interest rate is very low (the incentive to buy the mortgage) However, when the introductory period ends, it means they move to a much higher interest payment. It is feared that up to 500,000 homeowners could be at risk of defaulting leading to home repossession.” (Pettinger, 2008)
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