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why is there talk that the US financial market could affect
Deals_2
Posts: 2,410 Forumite
interest rates over here...? sorry not my specialist area but would be good to try and understand. thanks
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Comments
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Two reasons, I'd say:
- If the banks are sitting on bad debts/worthless papers, they'll have to make provisions for that in the form of capital that they'd have to keep around. Which means that they can't lend the money to someone else, ie you or me. And if money is scarce, the price goes up like it does for anything else; In this case, the price is the interest rate.
- I would expect (in fact it's already been mentioned) that it'll have a negative impact on a lot of lenders everywhere as they may well have trouble securitising their mortgages in order to sell on the debt (which is what the whole problem is about IMHO - subprime lenders bundleing loans into CDOs and flogging them on, thus getting new capital to lend). If they can't sell it on and it sits on their books, they can't lend as much due to capital requirements and all that. Hence again, money supply is getting tighter and people will have to pay more for the money. I would also expect that the rating agencies are going to have a closer look at the quality of the debt that is being sold on and probably class it lower than they have in the past. This'll also drive up the cost.
Hope this makes sense to you...0 -
For the same reason it affects, say, Germany
http://www.iht.com/articles/2007/07/30/business/sub.phpA house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
Another good article:
http://news.independent.co.uk/business/analysis_and_features/article2809204.eceErrors of opinion may be tolerated where reason is left free to combat it. - Jefferson0
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