Project Final Draft 2
801980 P.P.S.
The causes of the sub-prime mortgage crisis and its effects on the UK
14/08/2014 The causes of the sub-prime mortgage crisis and its effects on the UK
1. Introduction
The sudden incident of the sub-prime mortgage crisis in USA astonished a huge amount of the population and this event is closely linked with the global financial crisis (Taff, 2003). As an example, it is believed that the rising loan incentives in the UK, such as a long-term trend of increasing housing prices, are important factors which accelerated the process of a financial crisis (Lahart, 2014). What is more, the decreasing price of houses is a direct factor in the disappearance of mortgage-related security requirement (Taff, 2003). As an obvious example, declines in family spending and business investment which lead to a higher real estate debt and a sharply decreasing of housing price (Lahart, 2014).
There is no denying that both China and the UK suffered from financial crisis extremely. For instance, Ordos, located in the north of China, is confronted with an economic instability in recent years because of the sub-prime mortgage crisis. Furthermore, Lynn (2007) claimed that the UK faced its own sub-prime crisis as well as the US. However, the effects of financial crisis on these two countries remain unclear. In this study, the causes of sub-prime mortgage crisis will be examined and the impacts on banking in China and UK will be explored. This project is structured as follows. Firstly, the causes and the effect of sub-prime mortgage will be discussed, then how it affects the UK will be introduced. Finally, policy implications in the UK will be proposed to deal with the crisis.
2. Main body
2.1 Overview
With the violent presence of sub-prime mortgage crisis, most economies are fighting with problems linked to sub-prime mortgage which has inspired a rebound in some fields such as banking and real estate
The causes of the sub-prime mortgage crisis and its effects on the UK
14/08/2014 The causes of the sub-prime mortgage crisis and its effects on the UK
1. Introduction
The sudden incident of the sub-prime mortgage crisis in USA astonished a huge amount of the population and this event is closely linked with the global financial crisis (Taff, 2003). As an example, it is believed that the rising loan incentives in the UK, such as a long-term trend of increasing housing prices, are important factors which accelerated the process of a financial crisis (Lahart, 2014). What is more, the decreasing price of houses is a direct factor in the disappearance of mortgage-related security requirement (Taff, 2003). As an obvious example, declines in family spending and business investment which lead to a higher real estate debt and a sharply decreasing of housing price (Lahart, 2014).
There is no denying that both China and the UK suffered from financial crisis extremely. For instance, Ordos, located in the north of China, is confronted with an economic instability in recent years because of the sub-prime mortgage crisis. Furthermore, Lynn (2007) claimed that the UK faced its own sub-prime crisis as well as the US. However, the effects of financial crisis on these two countries remain unclear. In this study, the causes of sub-prime mortgage crisis will be examined and the impacts on banking in China and UK will be explored. This project is structured as follows. Firstly, the causes and the effect of sub-prime mortgage will be discussed, then how it affects the UK will be introduced. Finally, policy implications in the UK will be proposed to deal with the crisis.
2. Main body
2.1 Overview
With the violent presence of sub-prime mortgage crisis, most economies are fighting with problems linked to sub-prime mortgage which has inspired a rebound in some fields such as banking and real estate