Monday, March 5, 2007
Will the sub prime fall out reach the UK?
Well, unfortunately it's not quite that simple. In the race to the bottom to lend to sub-prime and near-prime borrowers, lenders lowered standards to the extent that everyone and their dog decided they could buy a house. When you artificially stimulate demand like that, we know what happens next - more demand = higher prices, all the way across the market. But as dozens of sub-prime lenders go to the wall and the entire industry acquires pariah status, the sub-prime money will dry up. And as it dries up, so will the source of the extra demand - and that means lower prices