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Wednesday, October 16, 2019

Contempory business issues-sub-prime lettings Essay

Contempory business issues-sub-prime lettings - Essay Example In September 2007, Northern Rock, the UKs fifth largest mortgage provider, was forced to seek an emergency funding from the Bank of England, the UKs central bank as a result of problems in international credit markets attributed to the sub-prime lending crisis. Not only that, even the IMF has warned the UK housing market about the mortgage scenario in the country. According to IMF, the UK market is even more overpriced than its US equivalent before the current decline. Consequently, IMF has downgraded its forecast for 2008 growth to 2.3%. They attribute the dangers to higher lending standards than in the US as well as strong immigration combined with constrained supply. Recently, Morgan Stanleys David Miles described himself as ‘relatively pessimistic’ about the UK housing market. According to him, it is in a worse shape than its European counterparts. He further warned that limited supply wont continue to hold up prices into the future. In this context, I would also like to state the perplexing figures release by ‘Shelter’. According to which more than a million people used high-cost credit card loans to meet rental or mortgage demands in the last 12 months. Out of the 2,000 households polled, 6% had relied on a card, and when payments were made by young people aged between 18 and 24 that figure rose to 7.5%. Just few days ago, the Chairman and CEO of the global financial giant, Citigroup, had to resign owing to almost $5-billion write-off in mortgage due to the sub-prime crisis. These are certainly worrying signals of times to come. At this point, let us try to understand the root causes of the subprime crises in US. The subprime mortgage lending problems actually began almost three years ago when mortgage companies started giving out loans to consumers without asking for any documentation or verification. As a

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