Experts believe that the mortgage crisis was perhaps the biggest financial shock in the country since the Great Depression of the 1930s and early 1940s. The subprime mortgage crisis caused by the explosion of the housing bubble in the United States did not leave the world’s major economies unharmed. The International Monetary Fund (IMF) expects the country’s GDP to grow by about 0.6% in 2009.
Liquidity problems in the banking sector are manifesting themselves as a result of the subprime mortgage crisis. The problem worsened in late 2006 due to a growing number of seizures. This again exacerbated a global slowdown in the economy between 2007 and 2008.
High default rates marked the beginning of the crisis when those who did not qualify for a loan (subprime) were given the same. This made the agreements more risky. The credit history of the subprime borrowers was damaged and they were unable to repay the loan amount. Uncertainty prevailed as the housing market was not as expected.
Statistics confirm that about 1.3 million homes in the United States in 2007 were subject to seizures. In addition to the difficulties of real estate operators, ARM or regulated interest rates have been reset to a higher rate than mortgage interest rates. As of February 2008, banking and non-bank financial institutions reported losses of $ 170 billion.
The impact of the US subprime mortgage crisis on the world economy
The subprime mortgage crisis in the United States not only caused a serious recession, but also the world economies fell sharply. Some countries may have felt this before, and some may resist the wave for months. Finally, all major economies have succumbed to the sub-crisis. Let’s take a look at how markets developed in Asia, Australia and Europe after the US mortgage crisis.
1. South Korea’s main index decreased by 4%
2. Standard indicators in Hong Kong and Thailand decreased by 3%.
3. A large sale was witnessed in Asian markets.
4. Stock market experts in the UK have not yet addressed the root causes of the economic performance.
5. The stock markets of Thailand, Australia and Germany were hit hard.
6. France, the United Kingdom and Germany saw a decline of more than 2% in key indices.
7. IKB Deutsche Industriebank was severely affected by the US subprime mortgage crisis.
8. The Asian financial market has witnessed the withdrawal of all shares by First Public Investment.
9. Macquarie Bank, a well-known financial services company in Australia, announced that investors could lose 25% or more of their investments.