Standard & Poor’s Rating Services is making it more difficult for individuals to obtain adjustable rate mortgages (ARMs). Their official stance is that this type of loan is the only factor that is keeping the prices of homes soaring.
The S&P foresees many of these borrowers defaulting when interest rates rise and their monthly payments increase 50 to 90 percent.
Update: Paul Farrell from MarketWatch is getting involved in the discussion. He believes that high real estate prices is indicative of a global megabubble. He says, “If this megabubble exists, and if it bursts, the $8 trillion in wealth lost in the 2000-2002 bear market will be peanuts,” while remaining sketical and untrusting of doomsday scenarios. Take his “magabubble poll.”
Updated February 6, 2012 and originally published June 27, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.