Can the mortgage crisis get even worse?

By Adviseur Mijn

The economy is in dire straits, but some mortgage experts believe it will get even worse... The so called 'second wave' of the mortgage crisis is predicted to be even worse than the original subprime crisis. The circumstances are looking worse by the day, with unemployment rising, home prices going down and option ARM interest rates likely to boom in the coming months.

Across America, the housing market is far from normal. Stability isn't coming anytime soon if we look at the recent spike in inventory caused by foreclosures and homeowners sizing down. The added inventory on the housing market is causing prices to drop sharply. Seeing that many homeowners are having trouble selling in today's market, we might see another increase in foreclosures in the near future.

Option ARMS were a great mortgage pick for some homeowners, because they gave home owners more control over the monthly mortgage amount.

Before the mortgage market blew up, option ARM mortgages were a great option for homeowners that wanted more control over the required monthly payment. However, with the current market conditions, option ARM interest rates are likely to spike. This will cause a surge in the required monthly payment for homeowners. The added burden of a couple of hundred dollars in extra mortgage payments may be too large for many households.

Because of lower home prices, many people will discover they owe a big debt on a house that's worth a lot less than they think. Combine this with higher unemployment rates, and a second tidal wave of the economic crisis is on the horizon.

About the Author:

Adviseur Mijn writes articles about mortgages in English and articles about hypotheek rente and goedkope hypotheek oversluiten in Dutch.