If Subprime Goes Down, Who Else Does?

With the subprime lending market being what it has been so far this year, many are concerned about where is can go from here. Many are already in over their heads with home and auto loans, and people are concerned that if it continues to get worse that the financial stability of many families and banks will ultimately fail. The major concern of course is a recession of large proportions, so something has to be done.

Experts say that many consumers in this country are actually doing very well and that inflation is contained, but others such as Nouriel Roubini of NYU says that the housing market is due to drop, and that an auto recession is right around the corner. He says that things will continue to deteriorate unless something is done quickly.

They say that the biggest problem is those who are holding the 20% of loans that were written last year, that already had bad credit. They signed auto loans, etc. that were for higher interest rates just so they could get the loans. Now some $1.3 trillion in subprime loans are outstanding, and many of those are home loans that are going to be looking at 12% interest rates.

They say that for now, auto loans and credit cards are holding their own, while mortgages seem to be having the biggest share of the problems. They say that delinquency rates on auto loans are not as rampant as they are in mortgages, but that is simply just a state of grace for now.

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