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One of the major reasons from where the financial crisis started is the sub prime mortgage crisis in the housing and development sector which was actually a result of deregulated financial structure. There are many other reasons why the mortgage crisis actually started and those reasons can be classified as low interest rates, easy availability of loans, good infrastructure available with loads of value for money choices available. The most important factor which affected the global crisis largely is the mind game big financial institution played with the consumers who got attracted to the easily available loan component which lead to people buying million dollar and so on and so forth homes. Many of the luckier people still got their way out as their property still stands out to be fifty percent higher than its original price at the time of purchase but few of the unlucky ones got trapped in the cycle. They started feeling the heat at the onset of the initial phase of credit crunch and with the property prices falling from low to lowest lows. These unlucky ones could not pay the monthly dues and eventually by defaulting months together have to foreclose the loan. In
the initial phase when the slightest of heat was seen during the year 2000 when the property prices was at its peak and analysts had their own view of who knows what saying that it still has a long way to go. People got crazy, they thought the best idea is to buy property and the underlying factor which influenced it was the easily available loans and mortgage structure. The refinance was also done nicely without any hindrance and the financial structure looked like a piece of cake as if it's so easy that considering it not essential. But, all this changed with all of a sudden credit crunch started to surface and people have no money or source to go to get liquidity. In these circumstances, the banks also showed their back and the lenders with their high rate of interest took advantage where ever they could by offering cash for home at a very minimal rate. Many of the people who had financed their homes thinking of re financing had their dreams converting to nightmares over night and the world seemed upside down. The finance structure got bit annoying and strict with loan not easily available, hedge funds got badly stroked as well and all these factors lead to less number of home sales. Now, people opened their eyes and started stretching their head, back and got drunk as they panicked to understand what is happening and to add to the agony stock market did crashed, so if you thought you had back up, even that is gone. |
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