The Phaserl


Fresh fear over US sub-prime lending

America’s sub-prime mortgage market is beginning to reheat, leading investors to warn of the possibility of a renewed financial crisis.

by Katherine Rushton, The Telegraph:

Demand for sub-prime mortgage bonds, which are not backed by US government-controlled mortgage lenders Freddie Mac and Fannie Mae, has surged since the start of last year, as yields on treasury bonds remain low.

Returns jumped 41pc last year, and have climbed a further 12.7pc this year, according to data from Barclays.

The demand has led to fears that investors could be taking risks so big that they will pave the way for a repeat of the financial collapse.

“Debt-financed consumption supported by inflated asset prices is what led to the financial crisis of 2008. It’s amazing how willing we are to travel down that road again,” Peter Schiff, head of investment firm Euro Pacific Capital, said.

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