With the cooling of American housing market, especially the increase of short-term interest rate, the repayment rate of subprime loans has also increased significantly, and the repayment burden of buyers has increased greatly. At the same time, the continuous cooling of the housing market also makes it difficult for buyers to sell their houses or refinance through mortgaged houses.

This situation directly led to a large number of subprime borrowers unable to repay their loans on time, and banks recovered their houses, but they could not sell them at high prices, causing large-scale losses and triggering the subprime mortgage crisis.

2. The impact of the subprime mortgage crisis:

Since the subprime mortgage crisis broke out in August 2007, it has caused great impact and destruction on the international financial order, produced a strong credit crunch effect in the financial market, and exposed the systematic financial risks accumulated in the international financial system for a long time. The financial crisis triggered by the subprime mortgage crisis is the most serious financial crisis in the United States since the Great Depression in the 1930s.

The subprime mortgage crisis, which originated in the United States, is spreading around the world, and the global financial system has been greatly impacted, and the crisis has hit the real economy hard. China has also been affected by the subprime mortgage crisis.

Excessive innovation of financial instruments, distorted interests of credit rating agencies and relaxed supervision of monetary policy are the main reasons leading to the subprime mortgage crisis in the United States. The measures taken by the American government, such as massive capital injection, continuous interest rate cuts and direct intervention, have achieved some results, but they have not fundamentally solved the problem.

Extended information American subprime mortgage crisis is also called subprime mortgage crisis, which is also translated into subprime mortgage crisis. It refers to a financial storm in the United States, which was caused by the bankruptcy of subprime mortgage institutions, the forced closure of investment funds and the violent shock of the stock market. It has led to the crisis of insufficient liquidity in major financial markets around the world. The "subprime mortgage crisis" in the United States began to appear gradually in the spring of 2006. In August 2007, it began to sweep across the major financial markets in the world, such as the United States, the European Union and Japan. The subprime mortgage crisis has become a global hot issue.

On the surface, the direct cause of the US subprime mortgage market storm is the rising interest rate in the United States and the continuous cooling of the housing market. The rise in interest rates has led to an increase in repayment pressure. Many users with bad credit feel that the repayment pressure is high, and there is the possibility of default, which has an impact on the recovery of bank loans and has also had a serious impact on many countries around the world, including China. Some scholars pointed out that "the United States, which should have gone bankrupt technically, owes too much debt to other countries in the world, and creditor countries do not want to see the United States go bankrupt, so they can not only abandon US Treasury bonds, but even continue to subscribe for more US bonds to ensure that the United States does not go bankrupt."

Because the house price was high before, the bank thought that although the loan was given to the subprime borrower, if the borrower could not afford the loan, he could use the mortgaged house to repay it, auction or sell it to recover the bank loan. However, due to the sudden drop in house prices, the bank sold the house when the borrower was unable to repay it, only to find that the funds obtained could not make up for the loan+interest at that time, or even the loan amount itself, so the bank would lose money on this loan.

It is ok for one borrower and two borrowers to have such problems, but due to the rising interest rate of installment payment and the fact that these borrowers themselves are subprime credit lenders, a large number of borrowers are unable to repay their loans. As mentioned above, the bank repossessed the house, but failed to sell it at a high price, which led to a large-scale loss and triggered the subprime mortgage crisis.

References:

Baidu encyclopedia-American subprime mortgage crisis