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The sub-prime story in the states

The market began another downward march Wednesday on growing fears that the troubles in the subprime mortgage sector are turning into a full-blown financial crisis. The Dow Jones industrial average tumbled more than 100 points shortly after noon Wednesday before rebounding, as investors began to worry that rising delinquencies in the mortgage market–which have sent the stock prices of subprime lenders tumbling–could start to affect the broader economy. All three major stock indexes were knocked down about 2 percent. Subprime lenders provide mortgages to people with poor credit. Though they are a relatively small part of the U.S. economy, their difficulties raise larger concerns about the housing market, which until its slowdown in recent years was a big source of money for consumers.

Subprime loans feature higher interest rates for potential homeowners who don't have enough income to qualify for traditional fixed-rate mortgages. They are usually offered by the 50,000 independent brokers who get a fee for their services, which include attracting people who desperately want to own a home but can't afford a traditional mortgage. In some cases, applicants don't have the money to make a downpayment, so 100 percent of the home's appraised value is financed.

The prospect of bankruptcies in the U.S. mortgage industry prompted investors to buy safer assets like government securities. Lower-than-expected retail sales growth last month also rekindled talk that the Federal Reserve could cut interest rates this year. Lehman Brothers Holdings Inc., the second-biggest U.S. underwriter of mortgage-backed bonds, said risks posed by rising home-loan delinquencies are "well contained"

Canadian mortgage market is still going strong. Very high risk products have limited availability in Canada. Canadain housing market is also going strong especially in the west.

Talk to your mortgage broker about your mortgage oprtions.

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