Problems in US housing market to last

29 August 2007

Global equity and credit markets have fallen as a result of trouble in the US sub-prime mortgage market and portfolio manager, Adi Sorber, believes it will get worse.

If homeowners cannot pay their monthly mortgage bills then it will be added to their overall mortgage debt.

Portfolio manager of ABN AMRO's Global Equity Fund, Mr Sorber, said: "Both monthly payments and the debt itself are set to grow. On top of all that, house prices are no longer rising and cannot bail out homeowners.

Mr Sorber believes that the slump in credit markets will only make it harder for a recovery in the housing market, along with the rise in interest rates, and subsequently mortgage rates, the problems could go on into the new year.

Mr Sorber added: "Parts of the real economy are feeling the consumer’s distress from higher mortgage payments, a lack of home equity to draw on and tighter lending criteria."

The Federal Reserve has not decided whether it will help the situation, and Mr Sorber said: "A US rate cut should certainly help sentiment in the financial markets, but it would be a poor reflection on the underlying issues and the real economy."

ABN AMRO Asset Management operates in over 20 countries.

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