OECD Says the Full Effect of the Sub-Prime Mess is Still in Front of Us
The following from Yahoo basically states that the full effect of the sub-prime problems are still in front of us, both for the banks and the consumer. Text in bold is my emphasis.
The full global impact of the U.S. subprime mortgage market crisis has yet to be felt although more information is needed to determine its full extent, OECD Chief Angel Gurria said in a speech in Budapest on Thursday.
"I don't think we have seen the end of the manifestations of the problem. I think we need more information about the impacts," Gurria, Secretary-General of the Organisation for Economic Co-operation and Development, said.
He said the greatest impact of the recent turmoil was on confidence in the banking sector, which has not returned to normal, and said the crisis had accelerated an ongoing slowdown in the pace of global growth.
"(The) greatest impact of subprime is on the confidence level, and multiplication of the impact on the whole financial system, which stopped giving loans to each other and to normalize this would take time," Gurria said.
For ordinary consumers, the impact will be felt next year.
"The time of reset of interest rates is going to be ... in April-June 2008. This is when interest rates are going to increase for many of the mortgage borrowers, we have to see how the system is going to proceed with that," Gurria said.
Markets were first gripped by a credit crunch in August when interbank lending dried up as banks realized they did not know which of them was dangerously exposed to shaky U.S. home loans.
With precarious U.S. mortgages bundled up into complex financial products and sold on around the globe, uncertainty lingers about where the exposure lies although a raft of bank results reports have shed some light.