Suprime letting Literature review - Essay Example

While there is no official credit profile that describes a sub prime borrower, it is generally accepted that people in the United States having a credit score below 620 points will fall into this category. In an attempt to tap this burgeoning market, lenders often speculate and take risks associated with lending to people with poor financial records. Sub prime offers an opportunity for borrowers with a less than ideal credit record to gain access to credit. It has been found that over the past six years, home ownership nationwide increased from 66 percent of the working population, to almost 70 percent.

The pros and cons of sub prime markets will now be discussed in the literature review .The obvious advantage of Sub-Prime letting is of course the fact that people with poor credit history, low income and no assets are able to borrow money from many banks and lending company's .This is advantageous also as small or no deposit is accepted and this may prove attractive to many people who are not aware of the consequences of such borrowing or lending.However this market has its cons in the sense that it is unpredictable due to variable interest rate and the debtors may not be able to able to keep up with the payments thus causing credit victimization as the lenders may be able repossess the property/ business and are able to profit from re-sale through draconian lending contracts.

Aims The main research question therefore is "To what extent has the sub- prime phenomenon of the US financial markets affected the UK economy"The reason for selecting this topic is the recent financial crisis in the US sub-prime markets which has caused a world wide concern as to its concerns for its e effects and fall-outs on the EU Bloc which includes the UK. The research will be undertaken through a variety of secondary and primary research methodologies to have a better understanding of the research question within the given time scale.

Secondary Research Questions What is Sub-Prime letting What is the relationship between the UK and American Housing market What are the current conditions in the American Housing market with reference to Sub prime letting The aim is to identify the correlations between American Mortgage lenders and the UK lenders. Economic conditions, interest rates, inflations and other factors. With reference to economic conditions we may be able to identify as to why people are subjected to the sub prime market.

What are the pros and cons of sub prime mortgage lending Research Strategy Research is a fact finding activity (Dominowski, 1980). The aim of primary research is to make known something previously unknown to human beings and to advance human knowledge by making it more certain or better fitting; the aim is discovery (Elias, 1986). Kerlinger (1970) uses more technical language to define it as the systematic, controlled, empirical and critical investigation of hypothetical propositions about presumed relations among natural phenomena.

The research philosophy depends on the way we think about the development of knowledge and this thinking affects the way we do search (Saunders 2000). Whilst undertaking the research, a clear understanding of