In the recession of 90′s – everything dropped all of a sudden. Household debt, consumer credit, mortgage credit all of them fell without warning. Inflation took off and so did interest rate. Bank Prime soared to 25% a year. A bleak past, that we do not want to remember. To avoid similar mishap our regulators are working overtime. We can not tell with complete confidence but they did make some progress.
Reduced Mortgage Lending – Welcome To The Future:
Mortgage borrowing will reduce. Not too fast but slowly it will go down. The idea was to give ample time to the lenders and borrowers to adjust. To keep its income the same lenders will be forced to find alternative source of income. Obviously with reduced lending the lenders will have difficult time to keep the funding rates low as the overhead of most lenders remains the same unless the start axing jobs.
Never know what the future would look like but the lending activity will slow and some other side of the financial world will swell.