Can the mortgage crisis get even worse?

By Adviseur Mijn

As we all know, the economy is in trouble right now. It started with the subprime mortgage blow up and it went downhill from there. As bad as it is, experts believe the mortgage crisis will get even worse. Current market conditions are likely to result in an even bigger foreclosure boom, with option ARM mortgage payments going up rapidly in the near future.

The housing market is still not up to normal and it's not getting better anytime soon. Prices are dropping almost daily. This could mean a big foreclosure boom in the next couple of months. The next victims of this crisis will probably be the option ARM mortgages.

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

Now, with these market trends, the interest rates of option ARM mortgages are going to increase. This will mean substantially higher monthly payments for homeowners. An extra couple of hundred dollars added to the monthly costs might be a burden that's too big for many. And selling the house is not a very realistic option in today's market.

The lowering of housing prices make the problem even worse, because many homeowners will find them themselves with a large debt on a house that isn't worth nearly as much as they think. This fact, combined with increasing unemployment rates, may lead up to 'the perfect mortgage storm'.

About the Author:

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