Sub-prime mortgage crisis in the US is getting worse. Still, the situation of many who can't afford to service their mortgage loans will increase in the next two years. Why? Because it's inevitable that the lenders will increase their variable interest rate.
If your loan is $200,000 an increase of just .25% will add $500 per year to your interest repayment. For some borrowers living on a fixed income, this may just tip them over the edge, and result in a default. Bad credit is the inevitable effect.
Another sinister aspect the whole mortgage crisis is the credit squeeze, applied by all lenders; right from the Federal Reserve, to your locaal friendly society, credit union, or a small town bank. What does it mean? It means that new borrowers have to fulfill more stringent qualifying criteria, they will pay a higher interest, provide greater security, etc. In other words, only a few of them will get the funds to buy their home. In effect, housing prices will come down. Not good news for those who want to sell, and avoid defaulting, and damaging their credit score.
