Liquidity Nightmare Begins To Take Its Toll

Mortgage lenders across the world have seen widespread sell-offs in their shares on the major stock markets, after new fears over the impact of international finance markets.

Lenders have largely been unable to refinance debt, after a lack of liquidity has arisen in the finance market. Despite the best efforts of the European Central Bank, the Federal Reserve and the Bank of Japan, liquidity is still high on the agenda, as a crisis within the industry.

The loose lending practices of the controversial US sub-prime market have sparked worldwide fears of an immediate lack of credit, as rising defaults and foreclosures take their toll on cash flow amongst some of the most considerable mortgage lenders.

Meanwhile, inter-bank lending rates have increased dramatically to reflect the heightened risk of taking on debt in the current global environment.

US lender Countrywide lost 13% on its share values yesterday, after it announced it could be on the verge of bankruptcy as a direct result of the sub-prime sector.

In the UK, Northern Rock lost 5% on its shares over the course of this morning, with Australian mortgage lender RAMS down by a staggering 37% at close.

Investment funds and banks across the world have suffered as a result of the US sub-prime market, which has also had a dramatic impact on stock market trading.

And with many cash investments tied up in shares, funds globally have seen poor performance over the last few weeks.

Analysts have predicted that due to the nature of the problem in the sub-prime sector, there is no way of knowing the exact scale of the damage, despite early estimates that it may run into $100 billion.

And with repayments still proving to be a problem for many in the sub-prime sector, it looks to be a problem that simply won’t go away for the sake of the world economy.

Story link: Liquidity Nightmare Begins To Take Its Toll