UK Telegraph: US credit crisis escalates as defaults spread

[El Pinko]

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/13/cnusa113.xml


US credit crisis escalates as defaults spread

By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:20am GMT 13/02/2008

...The Mortgage Bankers Association says default rates on all outstanding home loans in the US have reached 7.3%, the highest level since modern records began in the 1970s.

Arrears on "prime" mortgages have reached a record 4%, confounding expectations that middle-class Americans with good credit records would be able to weather the storm.

While sub-prime and close kin "Alt A" total $2,000bil (£1,019bil) of debt, the prime market in all its forms is roughly $8,000bil. If prime default rates rise on their current trajectory, they could ultimately cause huge financial damage.

US house prices have fallen by 7.7% over the past year, according to the Case-Shiller index of the 20 biggest cities. The slide is likely to gather pace as 2.2 mil mortgages taken out at the height of the credit bubble adjust upwards by 250-300 basis points. Goldman Sachs says house prices may fall by as much as 25% from peak to trough - creating the worst slump since the Great Depression.