US President George Bush has unveiled plans to freeze interest rates on sub-prime mortgages to help alleviate the crisis engulfing the United States mortgage arena.
Rising interest rates and irresponsible lending have already led to thousands of Americans defaulting on their mortgage payments, and millions more face the same problem.
Bush is to make three options available to US homeowners that need assistance.
Firstly, they can have their monthly payments frozen at an introductory rate for five years.
Secondly, borrowers can either refinance their mortgage at a lower rate or, thirdly, apply to refinance through the Federal Housing Administration.
Around 1.8 million homeowners in the US face repossession because they took out loans with short-term ‘teaser’ rates, but the loans quickly became unaffordable as interest rates increased.
The crisis is also threatening the US housing market, which has seen prices fall dramatically in recent months.
Bush also launched a free telephone hotline for homeowners who are having difficulty meeting their loan obligations.
The crisis could have disastrous consequences for the US economy, which could face recession in 2008 unless major steps are taken to re-invigorate economic growth.
Furthermore, a recession in the US could trigger economic downturns in the rest of the world, though analysts believe the growing economies of China and India may help dampen the effects.
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