Sub-prime mortgage trouble

Boarded up windowsOver the last few days there has been growing trouble in the U.S sub-prime mortgage market. Sub-prime markets are used to finance persons who have bad credit ratings, as such the mortages represent a substantial risk for lenders, which is usually offset by increased interest rates.
However, worries have grown the the vast majority of people will not be able to repay these mortgages, defaulting on them. If this is the case world banks stand to loose millions... if not billions.

Certain sub prime lenders such as Victoria Mortgages have withdrawn their mortgage products until the markets stabilises.
For the housing market, in particular London, this represents a dangerous event. If sub-prime mortgages drop in number there is a real risk that the number of buyers, in particular, developers will drop. This would lead to a drop in house prices, and the end of the property bubble.

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