Fears of US mortgage crisis as homeowners face 12% interest

[133724]

The US central bank was under pressure last night to underpin the country's troubled housing market as figures showed an increasing number of US homeowners falling behind with their mortgage payments and having their properties repossessed.

The problems had a knock-on effect on Wall Street where the Dow Jones Industrial Average fell 242 points to close at 12,075 amid fears the malaise in the housing market would infect the rest of the economy. There were signs of mounting problems for firms that have aggressively sold home loans to people with poor credit ratings - so-called sub-prime mortgages.

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Borrowers with loans totalling $265bn (£137bn) are scheduled to have the interest rates on their mortgages reset this year and many of the poorest homeowners in the US could face interest rates as high as 12%. The Fed meets next week to set base interest rates but is expected to leave them unchanged at 5.25% despite the latest mortgage default figures.

http://business.guardian.co.uk/story/0,,2033234,00.html?gusrc=rss&feed=12

[upi402]

1. thanks for alerting those of us

who don't check in to the economics forum.
it's important to all of us.

[judaspriestess]

2. I just saw on Anderson Cooper

that the Asian market is being affected by this too.

[aint_no_life_nowhere]

3. So will this result in massive foreclosures?

And will it affect the price of rentals as people are driven out of home ownership and into the rental market and the demand for rental units rises?

[kurth]

4. Well, many foreclosed homes will become rentals

They won't sit empty for long.