What about sub-prime mortgages?

In the US, banks and building societies began loosening their lending policies, with many offering 0% downpayments on mortgages so that borrowers weren’t required to stump up any initial capital for their new home. This attracted many people in the ‘sub-prime’ category—those to whom credit would normally be denied because they were considered at risk of defaulting on repayments. With no capital invested, the sub-primers had nothing to lose and everything to gain: if house prices continued to rise, they would make money for nothing; if they fell, they could default on their repayments and declare themselves bankrupt (which carries little stigma in the US). Sub-prime borrowers were also attracted by, and in some cases mis-sold, ‘adjustable’ or ‘floating interest rate’ mortgages, many of which offered low rates for the first couple of years. While interest rates were low, floating rates seemed like a better deal than fixed rates to borrowers who were unaware of the risks involved.

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