Causes of the U.S. Subprime Crisis:
Cover Story of Contemporary Financialists, May Issue: An In-depth Look at the American Subprime Mortgage Crisis
It should be said that the original intention behind the creation of subprime mortgages in the U.S. was good, and during the first 10 years, it achieved significant results. From 1994 to 2006, the homeownership rate in the U.S. increased from 64% to 69%, with over 9 million households owning their own homes during this period, a large part of which can be attributed to subprime mortgages. Among those who obtained homes through subprime loans, more than half were ethnic minorities, most of whom were low-income earners. Due to poor credit records or inability to afford down payments, they were unable to secure conventional mortgages. Subprime mortgages provided these low-income individuals with options rather than outright denial of home loans.
However, the high-risk nature of subprime mortgages came hand-in-hand with their accessibility. Compared to the 6%～8% interest rates of regular mortgages, subprime mortgage rates could soar as high as 10%～12%. Moreover, the majority of subprime mortgages were adjustable-rate mortgages (ARMs). As the Federal Reserve repeatedly raised interest rates, the repayment rates on subprime mortgages continued to climb, ultimately leading to an increase in debt delinquency and foreclosure rates, culminating in today's crisis.