The Trigger: Rising Rates and Foreclosures The bubble began to deflate when the Federal Reserve raised interest rates to combat inflation. For years, this system thrived, but it was built on the fragile assumption that housing prices would rise indefinitely.
2008 Financial Crisis Mortgage Defaults Breakdown
Global Contagion and Economic Recession While the crisis originated in the US financial sector, its impact was global. The surge in foreclosures flooded the market with distressed properties, further driving down home prices and eroding the value of the MCDs held by major financial institutions, rendering them virtually worthless.
As mortgage payments increased for adjustable-rate subprime borrowers, defaults surged. European banks heavily invested in American subprime securities faced massive losses.
2008 Financial Crisis Mortgage Defaults Breakdown
The financial crisis of 2008, often referred to as the Global Financial Crisis (GFC), stands as the most severe economic downturn since the Great Depression of the 1930s. The Genesis of the Crisis: Housing and Subprime Mortgages At the heart of the 2008 collapse was a housing bubble in the United States.
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