The Causes and Effects of the Current Mortgage Crisis

The Causes and Effects of the Current Mortgage Crisis

The mortgage crisis is an ongoing economic and financial crisis which has been triggered due to an increase in delinquencies and foreclosures. It is more likely to have a strong affect on people who have bought a home during the early years of this century. Many home loans were given to people because of an occurrence of a housing bubble along the two coats of the United States from the years 2000-2005, as a result of which loans were granted at sub-prime rates to many people.

The prices of houses increased at an unbelievable rate and as such every person wanted to own a house and hence began borrowing at really low rates of interest to build a home with the belief that because the price of their house will only continue to increase in the future, they can easily refinance for lower payments. However, this bubble burst during the end of 2005 and has lead to several foreclosures with people having to move out of their homes because of their inability to make payments.

People landed up with owning low value homes and loans that were greater than the market price of their homes leading to a very unstable financial situation. Thus, it has created a financial crisis in all these areas and has also caused an adverse affect on the country’s economy by affecting the rental market all along these places. This issue still is a major problem with many people being rendered homeless and as such measures are still being taken to ensure that this issue can be completely resolved.

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