Why finance stocks are going down......?????????

i herd that subrime... what is this......bank giving mortgage below prime rate.... why????? is there house price is high....?????????Why less buyer and more seller...????????any affect on bank earning...............

Why finance stocks are going down......?????????loans uk

sub-prime is a term which refers to high-risk debtors, ie people with bad credit, low credit, or low income/high risk.

When the housing market was booming for the past few years, interest rates were low and credit was real cheap. Institutional lenders were getting very lax with who they were lending money to, and they sold many Adujustable Rate Mortgages to subprime debtors.

Well, the introductory fixed rate was all well and good, and the housing market was robust, so prices were rising, and people continued to buy.

But interest rates began to rise and the low introductory fixed rate expired and the interest payments adjusted to reflect higher market rates, subprime debtors found out they couldnt afford to pay the mortgage..so they began selling...

and selling...

and selling....

alot of people bought houses not to live in, but to cash in on the housing boom. and as soon as they started to see a lot of selling, they wanted out, too.

So they began selling,

and selling,

and selling.

So now everyone is defaulting on banks who offered subprime loans. And many of these banks borrow money to offer loans with. So what you have is everyone borrowing money from each other. Now everyone is asking for their money back, but because no one has the money to pay off their loans, there%26#039;s a liquidity crisis.

So basically its all a wicked chain reaction. And that%26#039;s whats causing the stock market to slump.

Why finance stocks are going down......?????????

loan

sub-prime does not mean giving mortgages below the prime rate even thought it certainly sounds that way. What that refers to is mortgages given to people who are not prime candidates for mortgages, ie lousy credit risks.

The reason financial stocks are dropping is because no one know what effect the mortgage fallout will have on these companies. The whole thing could cause a chain reaction with one thing leading to another and a nuclear melt down of the financial community could result. That is the fear and people are dumping any and every stock that is involved in finance.

Depending on whether you are an optomist or a pessamist, it is either a good time to buy financial stocks or a good time to sell them. It appears that currently there are more of the latter in the woods.

Being somewhat of a bargain hunter myself, I have been selectively nibbling on them. Hope I do not regret that.|||Makes no difference whether it%26#039;s finance stocks, high tech stocks, bio tech stocks, the Dow Jones 30 or that secret tip you happen to over-hear at the club, invest with the following advice, the good ones go bad and the bad ones get good. Life works on a sine wave and any and all of those stocks are subject to and succumb to that sine wave. Some stocks may seem hotter that the others but only because %26quot;someone%26quot; in the know may be talking louder than %26quot;someone%26quot; else. Chances are they are minimally involved with the stock or stock sector any way. It%26#039;s not your father%26#039;s stock market anymore. Investing in seasonal stocks are probably the safest.